Kroll Bond Rating Agency (KBRA) releases a new Structured Finance research report, “Key Deliverables: Restaurants Move to Expand Online Delivery.” The report makes the following key points:

  • Over 80% of the publicly traded restaurant chains we surveyed, including all of those who have issued whole business securitizations, are at least starting to explore online delivery options, with most partnering with delivery aggregators like GrubHub, DoorDash, UberEats, Postmates, and Amazon Prime Now Restaurants.
  • Although online delivery likely carries lower margin than in-restaurant sales, we think that most restaurant brands have little choice but to jump on the bandwagon. Those who lag behind may find it increasingly difficult to engage with younger consumers and retain market share.
  • Overall, we view the trend toward delivery as a positive for whole business noteholders. Any large capital expenditures, including the upfront costs associated with developing a digital delivery platform, are borne by the franchisor, while the franchisees bear the costs associated with using third-party aggregators.
  • Since cash flow to the ABS trust is from franchisee royalty payments, based on a percentage of sales, the increased revenue from online delivery should increase cash flow to the ABS trust, supporting healthier debt service coverage and leverage ratios.

Click here to see the report.

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KBRA is a full service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.