It’s dying.
I’ve been mostly absent from RNS for the last several months as I worked on a multistate* deal for my employers to purchase a decent-sized package of national-brand fast-food restaurant franchises, a deal that fell through this week because the numbers got so bad so fast. So yes, I’ll be blogging more, but my eyes have been opened, big time.
Get this: these deals are usually priced in multiples of EBITDA, that is, the earnings before interest, taxes, amortization and depreciation. For non-accountants like me, all that matters is that annual EBITDAÂ for this package at the time the sale contract was signed four months ago was roughly $X, so a sale price of 3 times EBITDA (a steal, BTW) would be $3X. Following?
So what happened while we were doing all the due diligence, licensing, and other legal crap to actually complete the sale? Well, in the last three months of 2011, yes food costs rose, but more importantly sales plummeted. I am not going to quote numbers because I can’t, but I can say the combination dropped annual EBITDA to roughly $.6X. That means that sale price of $3X was transformed to more than 5 times EBITDA, taking this from a really good deal to being some of the most overpriced restaurants in the country.
That also means much more than just “oh one year was 40% worse than the other.” It means that just this past quarter alone was SO bad that it caused that kind of drop to the annual figure for this package of stores.
Anybody afraid that Obama’s going to skate to reelection on “improving” economic numbers is deluding themselves. Wake up, folks.
* Not one of these restaurants was in California, either. For one thing, the vast majority of national class-action suits against these chains are always based in Cali, and I wouldn’t allow my employers to ever buy a restaurant in this state because of that alone.
So I’m not the only one who has seen some spooky scary stuff going on in the economy – and can’t really talk about it.
The media will not allow any discussion, but every normal person knows we are in a death spiral vs a vs the economy. The only silver lining to this that the damn O and his slaves in the MSM can’t stop the people from knowing the truth this time no matter what Presidential Decree the signs.
When you consider more people will move downscale to fast food from more expensive restaurants (from steak to bologna) in hard times, you would expect sales for these franchises to go up. For Q4 to affect yearly sales like that, ouch.
Learn how to cook, folks. Learn how to take beans and rice and turn them into something palatable.
And learn how to grow your own beans, because you might not be able to get them in the store.
Growing your own rice? Well, you might just be screwed there.
I rarely eat fast food anymore, or go out to eat at all… when I have lately, I’m shocked at how expensive it has become.
David, I think you’re seeing the effect of high oil prices.
Chris Martensen: High oil prices are a cause of recessions; at these prices economy can’t heal
Gas prices highest ever at this time of year
Senate Passes Payroll Tax Extension, Gas Price Increase Has Already Offset Benefits
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If only voters made their decisions on actual news rather than emotion.
Well, yeah, when fuel prices go up it costs more to grow and harvest, to process, to transport; so oil prices surely are a factor in this
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Luckily I’m a dairy farmer. At least I will still have food.