Let this be a warning for those about to read this story: I’m not all that good about predicting the future.
Why would I be? If I could predict what is going to happen in 2016, I’d be buying stocks or commodities, or building a doomsday shelter, rather than writing about all those things.
Still, a lot of trends are at work in the restaurant finance world. Prices have grown too high. There’s a lot of money sloshing around in the industry. Debt is still cheap. Things are happening. So here are a couple of things I think will happen next year. Just take them with a grain of salt:
The IPO market will slow further
When Habit Restaurants Inc. postponed its secondary offering in November, it was the clearest sign yet that institutional investors are leery of the restaurants that are going public. Several of the companies that have gone public over the past two years are trading near or below their initial public offering prices. That might spook some institutional investors that will be a lot choosier about offerings next year.
At least two chains will go private
As the IPO market slows, private-equity groups could step up and buy struggling public concepts. Several chains could be candidates for a takeout. A few of them own real estate or have company-owned locations that could be sold to create value. And valuations have come down in recent months, which could price more companies at a level where private investors would be interested in a buyout.
Prices for restaurants will come down
This is the most obvious one. Stock prices eased in the restaurant industry in recent months. That could be a leading indicator that investors have grown weary of the high prices being attached to some restaurant companies. Rising interest rates will also lower the prices that some investors will be willing to pay for these companies. If nothing else, valuations won’t go up.
Contact Jonathan Maze at [email protected]
Follow him on Twitter: @jonathanmaze
