The credit outlook for U.S. restaurants should be mostly stable in 2014, despite some weak industry fundamentals, according to a new report published by Fitch Ratings. Rising shareholder demands, however, will test credit trends for the industry, Fitch predicts.

Median total debt-to-operating EBITDA and total adjusted debt-to-operating EBITDAR are projected to be flat versus 2013 at 2.3x and 3.8x, respectively. However, returning cash to shareholders will be a key priority for most firms, even though same-store sales growth will be challenged and costs continue to rise.

Fitch predicts dividends will garner a larger share of earnings and cash flow while share buybacks are viewed as a wildcard given the emphasis on shareholder returns and less restrictive covenants.

The weak global economy, characterized by high unemployment and low GDP growth, and pressure on discretionary spending is expected to affect food-away-from-home spending. Also, increasing regulation portends higher wage and benefit cost. Fitch projects that SSS will average 2 to 2 percent for the year, up slightly from 2013 due mainly to price and mix.

Fitch also writes that regulatory issues — including the Affordable Care Act, higher federal minimum wages, immigration reform, and reduced supplemental nutritional assistance — could all have adverse effects on the industry.

Promotions will remain prominent in the industry but are likely to become more strategic due to concerns around restaurant-level profitability. Chains that appeal to higher income consumers are expected to continue to outperform.

Read more about restaurant industry trends.

Related Content

User Comments – Give us your opinion!
Products & Services

Distribution RFP’s & RFQ’s

http://global.networldalliance.com/new/images/products/6411.png

6411/Distribution-RFP-s-RFQ-s

See the latest in restaurant POS

http://global.networldalliance.com/new/images/products/1926.png

1926/See-the-latest-in-restaurant-POS

Features

http://global.networldalliance.com/new/images/products/4541.png

4541/Features

Restaurant Sales Builder

http://global.networldalliance.com/new/images/products/4286.png

4286/Restaurant-Sales-Builder

Solutions

http://global.networldalliance.com/new/images/products/4551.png

4551/Solutions

Can you prove your restaurant POS is PCI-compliant?

http://global.networldalliance.com/new/images/products/1292.png

1292/Can-you-prove-your-restaurant-POS-is-PCI-compliant

Business Performance Management

http://global.networldalliance.com/new/images/products/6413.png

6413/Business-Performance-Management

Operations Support

http://global.networldalliance.com/new/images/products/6409.png

6409/Operations-Support

Social Security Number (SSN) Verification

http://global.networldalliance.com/new/images/products/SSN_employmentsearch.gif

1426/Social-Security-Number-SSN-Verification

Cured Meats

http://global.networldalliance.com/new/images/products/6791.png

6791/Cured-Meats

Digital Menu Boards and ROI
Fast Casual Executive Summit
Request Information From Suppliers
Save time looking for suppliers. Complete this form to submit a Request for Information to our entire network of partners.