Restaurant industry merger-and-acquisition activity in 2013 continued to plateau, as it did in the prior year, and was still dominated by private-equity interest and franchise deals, according to a census from J.H. Chapman Group LLC.

And so far in 2014, the market for initial public offerings has cooled off and many deals are coming with private-equity investments in emerging chains, said David L. Epstein, principal with the Chapman Group, in a phone interview.

The Chicago-based investment banking firm’s annual “Chain Restaurant Merger and Acquisition Census” captured 97 transactions in 2013, one more than recorded in 2012 and three fewer than the 100 reported in 2011.

Nearly five months into this year, Epstein said, “My feeling about the number of transactions we’ll see in 2014 is that it will be less, unless we see some of the major chains refranchising.” In 2013, both Applebee’s Neighborhood Grill & Bar and Wendy’s undertook major refranchising efforts, he noted.

“We’re not seeing in 2014 the robust number of transactions that were being done in 2013,” Epstein said. “I’m a little surprised. I thought the huge success Wendy’s and Applebee’s had had in selling their corporate units to franchisees that a lot of other restaurants would see that and embark upon the same thing, but we haven’t seen that.”

Epstein noted financing for refranchising deals is often easier than for other acquisitions. “Lenders will agree with me that the best type of loan they like to make is to a franchisee of a concept who wants to buy more units in that concept,” he said. “They know how good or bad they are in operating those types of units. It’s typically a fairly good loan to make.”

Equity funds continued to be attracted to the industry, the Chapman census found, with those deals accounting for 35 percent of all transactions in 2013, rising from 27 percent in 2012.

“Many of the equity funds are looking for small, emerging chains,” said Epstein, adding that they’re also looking for great management, good unit economics and an ability grow but with a need for financial backing. “They’ve found great success in taking [these chains] to the next level,” he noted.

Already this year, a number of equity funds have found deals in smaller chains. In January, Lee Equity Partners made a significant investment in the six-unit Project Pie concept, which is based in Carlsbad, Calif. In February, KarpReilly LLC bought a controlling interest in the 12-unit Patxi’s Pizza of San Francisco. In March, Sentinel Capital, which earlier in the year bought the Checkers Drive-In Restaurants Inc., acquired the 67-unit Newk’s Eatery, based in Jackson, Miss. And in April, Laurel Crown Partners LLC and Huntington Capital made a $15 million investment in Chicago-based Native Foods Café, which has 16 units.

These smaller deals, Epstein said, don’t “involve the quantity of dollars that equity funds like to employ, but they have significant growth. These smaller chains can use the knowledge that these equity funds have in growing a business.”

Equity funds have done extremely well in the restaurant industry, Epstein added, because of the favorable earnings before interest, taxes, depreciation and amortization.

“They know that they have to build units,” he said. “They know unit growth means EBITDA growth. There’s leverage in building new units with the same management team and infrastructure. So every new unit that is built contributes significantly to the EBITDA of the company. That’s what they need, the growth in EBITDA. They also need leverage when they buy. This industry has been a magnet for leverage. Lenders have wanted to lend to this industry.”