We Sell Restaurants turned in a third quarter performance in units sold that was 14.8% above last year. That was in striking contrast to the national data released in the BizBuySell’s Quarterly Insight Report, a nationally recognized economic indicator that tracks the health of the U.S. small business economy. Based on their data, general business transactions were up 2% during the same period while other brokers reported only a 1.7% improvement over the prior year for restaurants.
Robin Gagnon, CEO of We Sell Restaurants, analyzed key findings for restaurants from the data. Here is a summary from her article on restaurant sales transactions, industry trends and expected future outcomes for the industry.
Restaurant Sales Performance: In Q3, restaurant sales saw a decrease of 7.5% from the previous quarter, though they were still 1.3% ahead of the previous year. This represents a slowdown after two years of the restaurant sector outperforming general business sales and was in stark contrast to the We Sell Restaurants performance which was 14.8% ahead of the prior year.
Revenue and Prices: Median revenue for restaurants rose by over 20% from the previous year to $728,254, but there was a decrease from the Q2 high of $800,000. Median selling prices for restaurants have risen by 7.4% over the previous year but saw a decrease from the last quarter.
Consumer Demand and Growth Forecasts: Despite the slowing in sales, consumer demand remains strong, and growth forecasts for the U.S. fast-casual market predict significant increases, with the foodservice market's CAGR at 28.35% and the dining out market at 53.21% over the period from 2022 to 2027.
Cash Flow: The median cash flow of restaurants sold dipped by 4% against the prior year's quarter, indicating that higher revenue isn't translating into higher earnings, partly due to significant food cost issues.
Market Dynamics: There was faster turnover in restaurant sales, with median days on market decreasing. Median asking prices for the restaurant sector increased over the prior year, but the average asking price to selling price ratio dipped below 90% for the first time, resembling the market during the pandemic.
Regional Analysis: Different regions in the U.S. experienced varying degrees of success. The Mountain region and the Northeast saw declines in listings and prices, while the Pacific Region (dominated by California) saw a significant increase in restaurant sales, likely influenced by legislative changes impacting franchise operations. The South continued to show consistent growth in restaurant sales.
Future Outlook: The article suggests a cautiously optimistic outlook for restaurant sales. Interest rates may have peaked, and the consumer's commitment to dining out remains strong. There's also an expectation that more restaurant owners, especially baby boomers, will look to exit the business, potentially increasing the inventory in the market.
Specialized Brokerage Performance: We Sell Restaurants, a specialized restaurant brokerage firm, outperformed the general industry trend with a 14.8% increase in units sold, indicating that specialized brokers may be better positioned to navigate the market and attract committed buyers.