RESTAURANTS INDUSTRY UPDATE DECEMBER

Transcription

1 Investment banking services are provided by Harris Williams LLC and Solebury Capital LCC, registered broker-dealers and members of FINRA and SIPC, and Harris Williams & Co. Ltd, which is authorized and regulated by the Financial Conduct Authority. Harris Williams & Co. is a trade name under which Harris Williams LLC and Harris Williams & Co. Ltd conduct business.

2 OVERVIEW INDUSTRY COMMENTARY Economic trends and evolving consumer preferences create opportunities and challenges for the restaurant industry. Commodity price declines remain a positive for restaurants from a margin perspective. However, the decrease in grocery prices may be encouraging consumers to re-think eating out. Additionally, the strengthened labor market and mandated minimum wage increases are driving up overall prime costs. Differentiated concepts offering healthy/better-for-you food options, unique flavors, and convenience and/or value are creating pockets of opportunity within the industry. M&A market activity for restaurants remains strong for differentiated growth concepts and performing franchise systems M&A activity has declined from 2015 levels, but strong companies are still attracting investor interest. Choppiness in industry performance combined with high valuation expectations are key drivers of reduced deal activity. Financing markets remain supportive of the industry, and we expect 2017 to continue to be a healthy M&A environment. Notwithstanding the strong post-election jump in share prices, publicly traded restaurants have struggled to maintain their outperformance. Several years into the recovery, investors seem less convinced about the strength of consumers and reticent to invest in restaurants in the wake of recent bankruptcies (Don Pablo s, Logan s Roadhouse, and Cosi). Fastcasual concepts struggle to maintain their luster after food safety concerns stalled Chipotle s growth and the sector has proven not immune to the same-store sales challenges affecting the broader industry. QSRs have shown particular resilience with respect to market performance due to their highly franchised structures and strong value propositions. WHAT WE RE READING After Two Consecutive Quarters of Stalled Traffic Growth, Restaurant Visits Decline in Third Quarter A confluence of squeezed consumer wallets, the rising cost of dining out, and changing needs and wants has brought the U.S. restaurant industry traffic growth to a halt in the first two quarters of 2016 and into the negative in the third quarter, reports The NPD Group. Quick Service restaurant traffic, which represent 80 percent of total industry visits, was negative for the first time in five years. (Link to Article) How McDonald's Leveraged A Key Partnership To Verify Sustainable Beef Tracking 9,000 head of cattle from birth to burger, McDonald s Canada and Cargill teamed up to develop and pilot one of the industry s first sustainable beef programs. While the program is over, the effects are not. The learnings and best practices used to execute the pilot program will be leveraged as more consumers desire food transparency and sustainability. (Link to Article) Why So Many Legacy Fast-Food Restaurants Are Getting Makeovers Trying to attract millennials goes beyond the menu. More and more restaurants are refreshing their asset base to appeal to a younger audience. Results seem to be favorable, with Arby s seeing a ~15% sales lift on remodeled units. (Link to Article) CONTENTS Economic Trends Public Company Summary Limited Service Full Service Debt Markets M&A Activity OUR PRACTICE Harris Williams & Co. is a leading advisor to middle market companies. Our restaurant experience covers a broad range of concepts and business models. This particular report focuses on trends and metrics in the following areas: Quick Service Fast Casual Pizza Beverage Differentiated Casual Casual Family Dining Fine Dining CONTACTS Glenn Gurtcheff Managing Director ggurtcheff@harriswilliams.com +1 (612) Tim Alexander Managing Director talexander@harriswilliams.com +1 (612) Ed Arkus Managing Director earkus@harriswilliams.com Ryan Budlong Managing Director rbudlong@harriswilliams.com +1 (415) Will Bain Director wbain@harriswilliams.com Brant Cash Director bcash@harriswilliams.com +1 (612) Ryan Freeman Director rfreeman@harriswilliams.com +1 (612) Andy Warczak Vice President awarczak@harriswilliams.com +1 (612) PAGE 1

3 % of Total Spend Indexed Value Labor Participation Rate YoY Growth Rate Unemployment Rate Indexed Value RESTAURANTS ECONOMIC TRENDS EMPLOYMENT 1 CONSUMER CONFIDENCE 2 (in millions) 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% Total Employment % 120 Nov-06 Nov-08 Nov-10 Nov-12 Nov-14 Nov-16 0 Nov-11 Nov-12 Nov-13 Nov-14 Nov-15 Nov-16 Total Employment Unemployment Rate LABOR PARTICIPATION RATE 1 WAGE GROWTH VS CONSUMER PRICE INDEX % 64.0% 63.5% 63.0% 62.5% 62.0% 61.5% Nov-11 Nov-12 Nov-13 Nov-14 Nov-15 Nov % 3.0% 2.0% 1.0% 0.0% Nov-11 Nov-12 Nov-13 Nov-14 Nov-15 Nov % -2.0% Consumer Price Index Wage Growth AT HOME AND RESTAURANT SPENDING 3 COMMODITY PRICE INDICES 1,4 60.0% 55.0% 50.0% 45.0% 40.0% Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep Nov-11 Nov-12 Nov-13 Nov-14 Nov-15 Nov-16 Food Away from Home Food at Home Corn Wheat Beef Crude Chicken Pork Milk PAGE 2

4 PUBLIC COMPANY PERFORMANCE 5,6 SUMMARY INFORMATION Segment # of Companies Median P/E Median EV/LTM EBITDA Median TEV/'17E EBITDA Median SSS Growth Quick Service x 12.6x 13.2x 1.2% Fast Casual x 13.5x 11.3x 1.1% Pizza x 18.7x 17.5x 5.5% Beverage/Snack Retail x 16.9x 14.8x 0.3% Limited Service x 13.5x 13.6x 1.0% Differentiated Casual x 10.3x 9.3x 0.3% Casual Dining x 9.1x 9.5x (1.3%) Family Dining x 10.7x 10.4x 0.4% Fine Dining x 9.8x 8.7x 0.6% Full Service x 10.0x 9.3x (0.1%) SOLEBURY S Q RESTAURANT EARNINGS RECAP Solebury s quarterly restaurant industry earnings recap tracks the performance of select public restaurant concepts relative to industry research analysts expectations. Solebury Capital is a leading independent capital markets advisory firm, providing clients with independent advice, highly-informed judgment, and transaction management services. Harris Williams & Co. and Solebury Capital are subsidiaries of PNC. Report SSS Revenue EBITDA EPS FY 2016 Issuer Date Below In-line Above Below In-line Above Below In-line Above Below In-line Above Guidance 11/3/2016 P 110bps P 0.4% P 13.7% P 19.0% 11/9/2016 P 120bps P 7.6% P 4.8% P 7.1% 11/9/2016 P 50bps P -1.3% P 9.0% P 11.3% Mixed 11/7/2016 P 240bps P 4.9% P 0.9% P 6.7% Unch. 10/26/2016 P -60bps P -1.4% N/P P 0.0% 10/18/2016 P 400bps P 4.2% N/P P 6.7% N/P 11/1/2016 P 30bps P 0.3% P 9.8% P 8.3% 11/1/2016 P -20bps P -1.2% N/A P 3.6% Reiterates 11/2/2016 P -90bps P -0.3% P 1.3% P -16.7% 10/25/2016 P -70bps P 0.6% P 1.1% P 2.2% 11/1/2016 P -40bps P -0.6% P 20.8% P 20.0% Reiterates 10/20/2016 P 80bps P -3.6% N/P P 3.4% Mixed 11/14/2016 P -20bps P -1.1% P 8.8% P 0.0% 11/7/2016 N/P P -1.2% P -11.5% P -3.2% 11/3/2016 P 20bps P 0.4% P -11.4% P 0.0% 10/25/2016 P -370bps P -4.5% N/P P -64.1% N/A 11/3/2016 P -100bps P -1.5% P 2.0% P -5.3% 11/2/2016 P -270bps P -9.3% P -12.9% P % Mean -116bps - 131bps -2.8% 0.1% 5.6% -11.9% 0.9% 7.9% -49.9% 0.0% 8.8% Median -70bps - 95bps -1.4% 0.3% 4.9% -11.5% 0.9% 8.8% -16.7% 0.0% 6.9% PAGE 3

5 PUBLIC COMPANY PERFORMANCE LIMITED SERVICE 5,6 MEDIAN SAME-STORE SALES GROWTH QSR Fast Casual Pizza Beverage/Snack Retail 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Q414 Q115 Q215 Q315 Q415 Q116 Q216 Q % 1.2% 1.1% 0.3% LTM SAME-STORE SALES GROWTH (QUARTERLY AVERAGE) 0.9% 4.5% 1.7% 3.0% 3.0% 2.5% 1.4% 1.6% 2.4% 2.8% 2.4% 7.1% 4.4% 5.6% 10.0% 3.1% 4.4% 1.2% 5.8% (0.1%) (0.5%) (0.7%) (3.9%) (0.3%) (22.5%) UNIT COUNT GROWTH (YOY) 40.0% 6.4% 1.5% 0.6% 6.3% 3.8% 0.9% 0.2% 3.2% 12.8% 6.2% 29.0% 8.2% 4.0% 10.0% 17.6% 22.4% 9.3% 3.9% 5.5% 23.0% 3.1% 1.4% 8.9% (2.3%) LTM EBITDA MARGIN 37.1% 32.5% 42.9% 35.1% 51.7% 15.4% 21.0% 27.6% 28.8% 21.7% 7.2% 16.0% 13.0% 10.2% 5.3% 14.6% 9.8% 18.9% 8.8% 20.0% 11.4% 17.3% 13.4% 23.1% (6.4%) PAGE 4

6 11 '11 02 '12 05 '12 08 '12 11 '12 02 '13 05 '13 08 '13 11 '13 02 '14 05 '14 08 '14 11 '14 02 '15 05 '15 08 '15 11 '15 02 '16 05 '16 08 '16 11 '16 RESTAURANTS PUBLIC COMPANY VALUATION LIMITED SERVICE 5,6 MEDIAN EV/LTM EBITDA TREND* QSR Fast Casual Pizza Beverage/Snack Retail S&P x 18.0x 16.7x 13.2x 8.8x 9.0x 10.6x 9.3x 8.3x 8.2x 19.9x 18.8x 13.5x 10.6x 9.3x 22.1x 17.7x 14.3x 12.0x 10.2x 19.1x 16.8x 17.6x 14.0x 14.9x 15.6x 12.8x 12.3x 10.9x 11.4x EV/LTM EBITDA 40.5x 34.1x 26.9x 18.0x 16.0x 13.5x 13.5x 10.7x 10.8x 11.8x 11.2x 9.9x 8.9x 13.6x 8.0x 13.2x 8.2x 21.2x 21.7x 18.7x 8.8x 9.4x 16.9x 17.8x N/A INDEXED SHARE PRICE CHANGE QSR Fast Casual Pizza Beverage/Snack Retail S&P YEAR OVER YEAR SHARE PRICE CHANGE 40.3% 29.9% 1.2% 4.5% 3.5% 19.6% 2.6% 16.7% 9.5% 42.4% 56.4% 53.7% 28.0% (10.2%) (12.6%) (31.6%) (25.4%) (30.3%) (19.7%) (27.5%) (18.8%) (29.0%) (5.6%) (62.2%) (61.1%) * Median of the Component Companies Median EV/LTM EBITDA Multiple. PAGE 5

7 PUBLIC COMPANY PERFORMANCE FULL SERVICE 5,6 MEDIAN SAME-STORE SALES GROWTH Differentiated Casual Casual Dining Family Dining Fine Dining 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% (1.0%) (2.0%) (3.0%) Q414 Q115 Q215 Q315 Q415 Q116 Q216 Q % 0.4% 0.3% (1.3%) LTM SAME-STORE SALES GROWTH (QUARTERLY AVERAGE) 4.1% 4.3% 1.2% 1.9% 2.7% 1.9% 1.1% 0.7% 0.7% 2.5% (0.6%) (0.9%) (1.8%) (2.3%) (1.8%) (2.9%) (2.2%) (3.2%) (1.8%) UNIT COUNT GROWTH (YOY) 14.9% 14.3% 16.2% 7.7% 6.9% 5.7% 0.7% 1.2% 1.2% 7.5% 6.7% 1.3% 1.6% 0.0% 1.4% (2.2%) (7.1%) (1.1%) (19.1%) LTM EBITDA MARGIN 40.1% 23.7% 13.3% 15.5% 12.7% 12.6% 10.0% 14.8% 13.2% 11.1% 6.3% 13.4% 9.3% 12.7% 13.6% 4.8% 12.8% 18.7% 15.3% PAGE 6

8 11 '11 02 '12 05 '12 08 '12 11 '12 02 '13 05 '13 08 '13 11 '13 02 '14 05 '14 08 '14 11 '14 02 '15 05 '15 08 '15 11 '15 02 '16 05 '16 08 '16 11 '16 RESTAURANTS PUBLIC COMPANY VALUATION FULL SERVICE 5,6 MEDIAN EV/LTM EBITDA TREND* Differentiated Casual Casual Dining Family Dining Fine Dining S&P x 12.0x 7.9x 8.3x 8.2x 7.4x 7.3x 7.8x 8.2x 6.7x 11.1x 9.0x 10.8x 9.5x 9.2x 12.3x 12.2x 12.1x 11.4x 11.5x 10.4x 10.5x 10.9x 10.2x 9.7x 9.8x 9.8x 10.2x 9.6x 8.6x EV/LTM EBITDA 16.9x 7.7x 10.3x 10.5x 12.7x 10.0x 7.6x 9.1x 10.4x 10.6x 6.9x 5.0x 12.6x 10.1x 11.3x 8.3x 9.0x 9.9x 9.8x INDEXED SHARE PRICE CHANGE Differentiated Casual Casual Dining Family Dining Fine Dining S&P YEAR OVER YEAR SHARE PRICE CHANGE 5.2% 25.5% 22.2% 7.5% 16.4% 30.5% 34.0% 12.0% 29.2% 25.4% 14.7% (19.0%) (5.7%) (1.5%) (23.8%) (10.9%) (15.4%) (1.4%) (45.4%) * Median of the Component Companies Median EV/LTM EBITDA Multiple. PAGE 7

9 PUBLIC COMPANY PERFORMANCE 5,6 SUMMARY * Price at As a % of Market Enterprise % LTM Revenue Growth LTM Margins P/E EV / LTM EV / 2017E ($ in millions, except per share data) Ticker 11/30/16 52-wk High Cap Value Franchised Revenue EBITDA 1 Year 3 Years Gross EBITDA Multiple Revenue EBITDA Revenue EBITDA Quick Service Restaurant Bojangles, Inc. BOJA $ % $653 $857 58% $521 $80 9.3% NA 19.8% 15.4% 18.8x 1.64x 10.7x 1.47x 9.8x Jack in the Box Inc. JACK % 3,363 4,530 75% 1, % 2.4% 28.2% 21.0% 28.7x 2.83x 13.5x 2.83x 12.0x McDonald's Corporation MCD % 99, ,845 82% 24,934 9,248 (2.8%) (3.8%) 40.7% 37.1% 22.4x 5.01x 13.5x 5.49x 12.7x Popeyes Louisiana Kitchen, Inc. PLKI % 1,241 1,386 97% % 9.2% 61.9% 32.5% 30.6x 5.19x 16.0x 5.05x 14.6x Restaurant Brands International Inc QSR % 11,138 33,141 99% 4,279 1, % NA 45.6% 42.9% 38.4x 7.75x 18.0x 7.57x 16.5x Sonic Corp. SONC % 1,194 1,808 89% % 3.8% 33.8% 27.6% 20.2x 2.98x 10.8x 3.74x 11.5x Wendy's Company WEN % 3,231 5,404 90% 1, (13.8%) (14.3%) 37.2% 28.8% 19.1x 3.40x 11.8x 4.63x 13.6x Yum! Brands, Inc. YUM % 23,265 31,389 79% 12,894 2,802 (2.0%) (0.4%) 28.1% 21.7% 16.2x 2.43x 11.2x 5.46x 15.3x Mean 0.0% (0.5%) 36.9% 28.4% 24.3x 3.90x 13.2x 4.53x 13.3x Median 0.8% 1.0% 35.5% 28.2% 21.3x 3.19x 12.6x 4.84x 13.2x Fast Casual Chipotle Mexican Grill, Inc. CMG $ % $11,473 $11,202 0% $3,867 $277 (15.4%) 8.0% 10.6% 7.2% NM 2.90x 40.5x 2.45x 19.0x El Pollo Loco Holdings Inc LOCO % % % NA 21.1% 16.0% 21.0x 1.59x 9.9x 1.43x 8.8x Fiesta Restaurant Group, Inc. FRGI % % % 9.9% 20.3% 13.0% 32.8x 1.15x 8.9x 1.08x 8.0x Habit Restaurants, Inc. HABT % % % NA 16.2% 10.2% NM 1.40x 13.7x 1.11x 10.8x Noodles & Co. NDLS % % % 12.1% 8.6% 5.3% NA 0.42x 8.0x 0.40x 7.4x Panera Bread Company PNRA % 4,631 5,310 54% 2, % 6.3% 15.6% 14.6% 35.4x 1.92x 13.2x 1.77x 11.8x Potbelly Corp. PBPB % % % 10.2% 14.6% 9.8% 47.1x 0.81x 8.2x 0.70x 7.3x Shake Shack, Inc. SHAK % 1,341 1,254 48% % NA 22.9% 18.9% NM 5.09x 26.9x 3.55x 22.5x Wingstop, Inc. WING % 882 1,042 98% NA NA 69.1% 35.1% NM 11.95x 34.1x 10.20x 26.4x Zoe's Kitchen, Inc. ZOES % % % NA 15.1% 8.8% NM 1.87x 21.2x 1.51x 18.4x Mean 11.9% 9.3% 21.4% 13.9% 34.1x 2.91x 18.5x 2.42x 14.0x Median 8.4% 9.9% 15.9% 11.6% 34.1x 1.73x 13.5x 1.47x 11.3x Pizza Domino's Pizza, Inc. DPZ $ % $8,079 $10,352 97% $2,394 $ % 10.5% 31.1% 20.0% 42.1x 4.32x 21.7x 3.86x 18.8x Papa John's International, Inc. PZZA % 3,260 3,615 85% 1, % 6.0% 18.7% 11.4% 35.6x 2.14x 18.7x 1.99x 17.5x Papa Murphy's Holdings, Inc. FRSH % % % NA 30.8% 17.3% 20.6x 1.53x 8.8x 1.35x 9.3x Mean 8.3% 8.3% 26.9% 16.2% 32.8x 2.66x 16.4x 2.40x 15.2x Median 9.2% 8.3% 30.8% 17.3% 35.6x 2.14x 18.7x 1.99x 17.5x Beverage / Snack Retail DAVIDsTEA, Inc. DTEA $ % $236 $188 0% $150 $20 NA NA 48.4% 13.4% 4.1x 1.25x 9.4x 0.98x 6.8x Dunkin' Brands Group, Inc. DNKN % 4,980 7, % % 5.7% 75.7% 51.7% 38.0x 8.72x 16.9x 8.39x 14.9x Jamba, Inc. JMBA % % 82 (5) (56.0%) (28.9%) 33.1% NM NA 1.68x NM 1.76x 15.4x Starbucks Corporation SBUX % 84,370 87,592 48% 21,311 4, % 12.7% 24.6% 23.1% 30.5x 4.11x 17.8x 3.69x 14.7x Mean (14.2%) (3.5%) 45.5% 29.4% 24.2x 3.94x 14.7x 3.71x 12.9x Median 2.1% 5.7% 40.8% 23.1% 30.5x 2.89x 16.9x 2.73x 14.8x Differentiated Casual BJ's Restaurants, Inc. BJRI $ % $863 $992 0% $961 $ % 8.1% 13.0% 13.3% 21.1x 1.03x 7.7x 0.94x 7.4x Buffalo Wild Wings, Inc. BWLD % 3,069 3,158 49% 1, % 17.3% 14.7% 15.5% 30.3x 1.59x 10.3x 1.42x 9.3x Chuy's Holdings, Inc. CHUY % % % 17.2% 16.0% 12.6% 35.2x 1.60x 12.7x 1.32x 10.7x Dave & Buster's Entertainment, Inc. PLAY % 1,971 2,286 0% % NA 44.1% 23.7% 23.4x 2.36x 10.0x 2.01x 8.3x Cheesecake Factory Incorporated CAKE % 2,806 2,945 0% 2, % 5.6% 15.9% 12.7% 21.9x 1.34x 10.5x 1.25x 10.2x Mean 11.7% 12.1% 20.7% 15.6% 26.4x 1.59x 10.3x 1.39x 9.1x Median 14.5% 12.7% 15.9% 13.3% 23.4x 1.59x 10.3x 1.32x 9.3x Casual Dining Restaurant Bloomin' Brands, Inc. BLMN $ % $1,960 $3,263 0% $4,297 $429 (3.1%) 1.8% 11.9% 10.0% 34.4x 0.76x 7.6x 0.75x 7.5x Brinker International, Inc. EAT % 2,637 4,363 39% 3, % 4.6% 13.9% 14.8% 16.1x 1.34x 9.1x 1.33x 9.6x Darden Restaurants, Inc. DRI % 9,022 9,613 0% 6, % (7.1%) 18.1% 13.2% 23.6x 1.38x 10.4x 1.32x 9.4x DineEquity, Inc. DIN % 1,512 2, % (3.4%) 0.5% 58.9% 40.1% 15.2x 4.26x 10.6x 4.23x 10.5x Red Robin Gourmet Burgers, Inc. RRGB % % 1, % 8.3% 15.6% 11.1% 22.0x 0.76x 6.9x 0.72x 6.6x Ruby Tuesday, Inc. RT % % 1, (5.0%) (4.0%) 12.0% 6.3% NA 0.31x 5.0x NA NA Texas Roadhouse, Inc. TXRH % 3,307 3,307 17% 1, % 13.1% 15.4% 13.4% 28.2x 1.69x 12.6x 1.50x 11.0x Mean 1.6% 2.4% 20.8% 15.5% 23.3x 1.50x 8.9x 1.64x 9.1x Median 1.5% 1.8% 15.4% 13.2% 22.8x 1.34x 9.1x 1.33x 9.5x Family Restaurant Bob Evans Farms, Inc. BOBE $ % $883 $1,249 0% $1,323 $123 (1.6%) (4.7%) 13.2% 9.3% 31.9x 0.94x 10.1x 0.95x 8.7x Cracker Barrel Old Country Store, Inc. CBRL % 3,912 4,197 0% 2, % 3.1% 14.9% 12.7% 19.9x 1.44x 11.3x 1.38x 10.4x Denny's Corporation DENN % 887 1,155 90% % 2.6% 27.6% 13.6% NM 2.30x 16.9x 2.19x 11.1x Luby's, Inc. LUB % % % 1.0% 10.1% 4.8% NA 0.40x 8.3x NA NA Mean 0.9% 0.5% 16.4% 10.1% 25.9x 1.27x 11.7x 1.50x 10.1x Median 1.6% 1.8% 14.0% 11.0% 25.9x 1.19x 10.7x 1.38x 10.4x Fine Dining Del Frisco's Restaurant Group, Inc. DFRG $ % $405 $402 0% $347 $44 7.2% 10.7% 18.0% 12.8% 21.8x 1.16x 9.0x 1.06x 8.0x Fogo de Chao, Inc. FOGO % % % NA 25.3% 18.7% 13.2x 1.84x 9.9x 1.65x 8.7x Ruth's Hospitality Group, Inc. RUTH % % % (2.5%) 23.6% 15.3% 18.1x 1.50x 9.8x 1.38x 8.7x Mean 12.8% 4.1% 22.3% 15.6% 17.7x 1.50x 9.6x 1.36x 8.5x Median 8.4% 4.1% 23.6% 15.3% 18.1x 1.50x 9.8x 1.38x 8.7x * Percentage Franchised is Based on 2015 YE Units. PAGE 8

10 2011Q4 2012Q1 2012Q2 2012Q3 2012Q4 2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 To Date RESTAURANTS FINANCING MARKET OVERVIEW RESTAURANTS AND RETAIL 7 AVERAGE PRIMARY SPREADS AVERAGE SECONDARY SPREAD L+600 L+500 L+400 L+300 L+200 L+100 L+700 L+600 L+500 L+400 L+300 L+200 L+100 L H16 L+0 2Q10 2Q11 2Q12 2Q13 2Q14 2Q15 2Q16 Revolving Weighted Avg. Institutional CREDIT STATISTICS 2016: 6.0x 4.0x 2.0x 4.9x 4.9x 3.9x 2.8x LOAN VOLUME (in billions) $14 $12 $10 $8 $6 $4 $2 0.0x Debt/ EBITDA Senior Debt/ EBITDA EBITDA/ Cash Interest LTM Jun-16 EBITDA - Capex/ Cash Interest $0 2Q10 2Q11 2Q12 2Q13 2Q14 2Q15 2Q16 Institutional Pro Rata SUMMARY M&A STATS 5 QUARTERLY RESTAURANT TRANSACTIONS (U.S. & CANADA) Private Equity Non-Private Equity PAGE 9

11 M&A TRANSACTION INFORMATION 5,6 NOTABLE TRANSACTIONS STONEFIRE Grill received a strategic investment on October 26, 2016, from Goode Partners. STONEFIRE Grill serves a wide variety of value-oriented, made-from-scratch items through its nine locations in Southern California. RECENT TRANSACTIONS Jimmy John s was acquired on September 8, 2016, by Roark Capital Group. Jimmy John s is a leading sandwich shop based in the U.S. with over 2,500 locations and $2 billion in system-wide sales. Wetzel s Pretzels was acquired on September 2, 2016, by CenterOak Partners. Wetzel s Pretzels is a retailer of premium baked soft pretzels. The Company has more than 300 locations in 28 states and six countries. Franchise Private Enterprise Location Equity Value EV / LTM Closed Target Seller Buyer Sale Involvement ($ in Millions) Sales EBITDA 11/30/2016 Burger King Corp. (7 Restaurants) 3G Capital Partners LP (New York) Carrols Restaurant Group, Inc. P /16/2016 Burger King Corp. (17 Restaurants) 3G Capital Partners LP (New York) Carrols Restaurant Group, Inc. P /9/2016 The Grand Central Oyster Bar, Inc. The Best Restaurant Group LLC /8/2016 Greer Co's Inc (44 Restaurants) Greer Cos., Inc. Cheddar's Casual Cafe, Inc. P P /1/2016 Brinker International, Inc. (11 Chilis Restaurants) Brinker International, Inc. Paradigm Restaurants LLC P /26/2016 STONEFIRE Grill, Inc. Goode Partners LLC P /20/2016 OCI Enterprises, Inc. (7 Restaurants) OCI Enterprises, Inc. (Indiana) CraftWorks Restaurants & Brewery, Inc. P /11/2016 Ruggles Green Texas LLC Hargett Hunter Capital Partners LLC P /29/2016 EBC Public House, Inc. Ev ans Brewing Co., Inc /21/2016 The Malnati Organization LLC BDT Capital Partners LLC P /8/2016 Jimmy John's Franchise LLC Weston Presidio Roark Capital Group, Inc. P /8/2016 M.H. Enterprises, Inc. Teriyaki Madness /6/2016 CiCi Enterprises LP ONCAP Arlon Capital Partners Management Co. LLC. P /2/2016 Wetzel's Pretzels LLC Lev ine Leichtman Capital Partners CenterOak Partners LLC P /2/2016 Groupe St-Hubert, Inc. Fairfax Financial Holdings Ltd x 8/23/2016 Burger King Corp. (7 Restaurants in Maine) 3G Capital Partners LP (New York) Carrols Restaurant Group, Inc. P /22/2016 Concession Management Services, Inc. Concession Management Services, Inc.HMSHost Corp /17/2016 The Red Sails Inn The Brigantine, Inc. P /10/2016 The Wendy's Co. (10 Restaurants) The Wendy's Co. Meritage Hospitality Group, Inc. P /26/2016 Kahala Brands Ltd. MTY Food Group, Inc x 7/25/2016 The Original ChopShop Co Hargett Hunter Capital Partners LLC P /25/2016 Wendy's International LLC (35 Restuarants) The Wendy's Co. NPC Quality Burgers, Inc. P x - 7/15/2016 Burger King Corp. (4 Restaurants) 3G Capital Partners LP (New York) Carrols Restaurant Group, Inc. P /9/2016 Shari's Management Corp. Falcon Investment Advisors LLC CapitalSpring LLC P /30/2016 Pink Taco Corp. Z Capital Partners LLC (Real Mex) P /21/2016 Project Pie LLC Lee Equity Partners Pieology Pizzeria P /16/2016 El Pollo Loco Holdings, Inc. (2 Restaurants) El Pollo Loco Holdings, Inc. PLM Restaurants LC P /8/2016 The Wendy's Co. (8 Restaurants) The Wendy's Co. Meritage Hospitality Group, Inc. P /1/2016 Ruby Tuesday, Inc. (8 Lime Fresh Mexican Grills Restaurants ) Ruby Tuesday, Inc. Rubio's Restaurants, Inc. P /26/2016 Burger King Corp. (6 Restaurants) 3G Capital Partners LP (New York) Carrols Restaurant Group, Inc. P /6/2016 Keenwawa, Inc. Valor Management Corp. P /26/2016 Cuv ee Wine Bar & Cellar Priv ate Inv estor Group (Led by Greg & Melanie Zemore) /21/2016 Quaker Steak & Lube, Inc. TravelCenters of America LLC /20/2016 Pinnacle Restaurant Group Eateries, Inc. Growler USA /12/2016 Progressiv e Gourmet, Inc. Monogram Foods LLC /12/2016 Baskin Robbins International LLC (PR Stores) Dunkin' Brands Group, Inc. Island Creamery, Inc. P /7/2016 Graffiti Junktion (Clermont) Graffiti Junktion Gray Fox Petroleum Corp /21/2016 Cowboy Red L C (13 Red Robins) Red Robin Gourmet Burgers, Inc. P /21/2016 The Smith & Wollensky Restaurant Group, Inc. Bunker Hill Management LLC Danu Investment Partners Ltd. P /29/2016 The Fresh Diet, Inc. Innov ativ e Food Holdings, Inc. New Fresh Co. LLC x - 2/29/2016 Vetri Family Urban Outfitters, Inc /26/2016 Fuzzy's Taco Opportunities LLC NRD Capital Management LLC P /1/2016 Happy Valley Corp. Flat Out Crazy LLC BD'S Mongolian Grill /1/2016 Mulligans Beach House Bar & Grill JPB Capital Partners P /31/2016 HuHot Mongolian Grill (21 Restaurants) Franchise Restaurant Concepts, LLC Sun Capital Partners, Inc. P P /25/2016 Max & Erma's Restaurants, Inc. American Blue Ribbon Holdings LLC Glacier Restaurant Group LLC P /22/2016 Williams Fresh Cafe, Inc. Laurence Capital Corp Druxy's, Inc. P /11/2016 Burger King Corp. (42 Restaurants) Mirabile Inv estment Corp. Cambridge Franchise Holdings LLC P /1/2016 Amore Victoria Private Investor Group (Led by Doug McNicoll) /31/2015 Smoothie King Franchises, Inc. Smoothie King Systems, Inc. Standard Chartered PE P /18/2015 The SeaWolf Group LLC The Grilled Cheese Truck, Inc /16/2015 Barteca Holdings LLC General Atlantic Corp. P /15/2015 Togo's Eateries, Inc. Nimes Capital LLC P /14/2015 Pinkberry, Inc. Highland Capital Partners LLC Kahala Corp. P /9/2015 Burger King Corp. (41 Restaurants) 3G Capital Partners LP (New York) Carrols Restaurant Group, Inc. P /7/2015 Deliv ered Dish, Inc. GrubHub, Inc /2/2015 TB Corp. (Taco Bueno) Palladium Equity Partners TPG Growth LLC P /3/2015 Maui Wowi, Inc. Kahala Corp PAGE 10

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13 HARRIS WILLIAMS & CO. RESTAURANTS SOURCES 1. Bureau of Labor Statistics. 2. University of Michigan. 3. USDA Economic Research Service: Food Expenditures. 4. IMF. 5. Factset. 6. Company Filings & Press Releases. 7. S&P. DISCLOSURES Harris Williams & Co. ( is a preeminent middle market investment bank focused on the advisory needs of clients worldwide. The firm has deep industry knowledge, global transaction expertise, and an unwavering commitment to excellence. Harris Williams & Co. provides sell-side and acquisition advisory, restructuring advisory, board advisory, private placements, and capital markets advisory services. Investment banking services are provided by Harris Williams LLC and Solebury Capital LCC, registered broker-dealers and members of FINRA and SIPC, and Harris Williams & Co. Ltd, which is authorized and regulated by the Financial Conduct Authority. Harris Williams & Co. is a trade name under which Harris Williams LLC and Harris Williams & Co. Ltd conduct business. THIS REPORT MAY CONTAIN REFERENCES TO REGISTERED TRADEMARKS, SERVICE MARKS AND COPYRIGHTS OWNED BY THIRD-PARTY INFORMATION PROVIDERS. NONE OF THE THIRD-PARTY INFORMATION PROVIDERS IS ENDORSING THE OFFERING OF, AND SHALL NOT IN ANY WAY BE DEEMED AN ISSUER OR UNDERWRITER OF, THE SECURITIES, FINANCIAL INSTRUMENTS OR OTHER INVESTMENTS DISCUSSED IN THIS REPORT, AND SHALL NOT HAVE ANY LIABILITY OR RESPONSIBILITY FOR ANY STATEMENTS MADE IN THE REPORT OR FOR ANY FINANCIAL STATEMENTS, FINANCIAL PROJECTIONS OR OTHER FINANCIAL INFORMATION CONTAINED OR ATTACHED AS AN EXHIBIT TO THE REPORT. FOR MORE INFORMATION ABOUT THE MATERIALS PROVIDED BY SUCH THIRD PARTIES, PLEASE CONTACT US AT THE ABOVE ADDRESSES OR NUMBERS. The information and views contained in this report were prepared by Harris Williams & Co. ( Harris Williams ). It is not a research report, as such term is defined by applicable law and regulations, and is provided for informational purposes only. It is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy. The information contained herein is believed by Harris Williams to be reliable, but Harris Williams makes no representation as to the accuracy or completeness of such information. Harris Williams and/or its affiliates may be market makers or specialists in, act as advisers or lenders to, have positions in and effect transactions in securities of companies mentioned herein and also may provide, may have provided, or may seek to provide investment banking services for those companies. In addition, Harris Williams and/or its affiliates or their respective officers, directors and employees may hold long or short positions in the securities, options thereon or other related financial products of companies discussed herein. Opinions, estimates and projections in this report constitute Harris Williams judgment and are subject to change without notice. The financial instruments discussed in this report may not be suitable for all investors, and investors must make their own investment decisions using their own independent advisors as they believe necessary and based upon their specific financial situations and investment objectives. Also, past performance is not necessarily indicative of future results. No part of this material may be copied or duplicated in any form or by any means, or redistributed, without Harris Williams prior written consent. Copyright 2016 Harris Williams & Co., all rights reserved. PAGE 12