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U.S. RESTAURANT OPERATORS MARCH 2019 INDUSTRY REPORT U.S. RESTAURANT FRANCHISEES: RESTAURANT INDUSTRY Seale & Associates is pleased to share our brief high-level insights report for the US Restaurant Operators Industry, where we cover mergers, acquisitions and divestitures of single-unit and multi-unit format, as well as single-brand or multi-brand formats. ▪ The restaurant industry in the United States presented a market size estimate of US$689.8 billion for 2018, an increase of 3.3% over 2017 ▪ A compound annual growth rate (CAGR) of 3.1% is expected for the period 2018-2022 ▪ According to Statista there are 660,755 restaurants in the United States, generating approximately 13.2 million jobs during 2018 Food Service Industry Market Size US $ Billion Historical Forecast $689.8 $668.5 $646.8 $626.5 $607.2 $589.1 2013 2014 2015 2016 2017 2018 $780.6 $756.9 $734.3 $712.5 $689.8 2018 2019 2020 2021 2022 U.S. Franchisees 2019 Sources: Statista, Marketline, Business Dictionary Seale & Associates Creative Solutions. Trusted Advice. U.S. RESTAURANT FRANCHISEES: RESTAURANT INDUSTRY ▪ California is the state with the highest number of restaurants, having 76,201 at the end of 2018, generating sales of US$97 billion ▪ The U.S. accounts for 21.3% of the total global market in the restaurant industry ▪ 7 out of 10 restaurants in the United States are operators with one unit Number of Restaurants and Sales by State Year 2018 Sales $ billions California Arizona New Mexico Texas Florida Restaurants: Restaurants: Restaurants: Restaurants: Restaurants: 76,201 10,281 3,468 48,064 41,366 Sales: Sales: Sales: Sales: Sales: US$97 Billions US$15 Billions US$4 Billions US$66 Billions US$50 Billions U.S. Franchisees 2019 Sources: National Restaurant Association, Marketline Seale & Associates Creative Solutions. Trusted Advice. U.S. RESTAURANT FRANCHISEES: FRANCHISES ▪ Restaurant franchises represent 36% of the total restaurant establishments in the U.S. and account for 48% of the total industry sales ▪ Full-service restaurants, that is, restaurants with a diverse selection of food and beverages, table service and consumed at the time, presented sales of US$270.7 billions during 2017 ▪ Full-service restaurants accounted for 52,599 units in 2017, representing an annual increase of 1.7% ▪ Limited-service restaurants, that is, restaurants ▪ with less variety in their menus and consumed at the moment of purchase, registered sales of US$237.1 billions in 2017 ▪ The number of limited-service restaurants was 190,649 during 2017, an increase of 1.8% over the previous year 24.0% Sales Distribution by Limited-Service Restaurantes Type of Restaurant 40.5% Full-Service Restaurants Year 2017 Others includes bar, clubs, etc. Others 35.5% 187,368 190,649 178,133 180,717 183,332 Number of Units by Type of Restaurant Limited-Service 50,320 50,933 51,649 52,165 52,599 Full-Service 2013 2014 2015 2016 2017 Limited-Service Restaurants Full-Service Restaurants U.S. Franchisees 2019 Sources: Franchise Direct, Marketline Seale & Associates Creative Solutions. 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U.S. RESTAURANT FRANCHISEES : OPERATORS AND FRANCHISES BRANDS The 200 largest restaurant operators in the United States presented sales of US$39.1 billion, an increase of 4.3% over the previous year ▪ The 200 largest operators reached 28,109 restaurants, representing 4.3% out of the total restaurants in the United States ▪ As of August 2018, the largest U.S. operator based on annual sales is Flynn Restaurant Group from San Francisco, with sales of US$1.9 billion ▪ The most popular franchise brand among the 200 largest operators is Pizza Hut with 30 operators that have the brand within its portfolio and with a total of 4,085 stores 10 Most Popular Franchises* # of Operators Units with the Brand 30,000 26,993 28,109 45 30 4,085 25,176 23,177 40 25,000 21,831 35 25 3,319 20,000 30 25 15,000 38 3,311 20 10,000 15 27 3,041 10 5,000 5 20 1,626 28.7 31.0 34.6 37.5 39.1 0 0 2013 2014 2015 2016 2017 18 1,589 Sales Units 12 901 Number of Restaurants and Sales of the 200 Largest Operators 12 874 Sales US$ Billion 8 746 9 726 *Among the 200 largest operators by the Franchise Times U.S. Franchisees 2019 Source: Franchise Times Seale & Associates Creative Solutions. Trusted Advice. U.S. RESTAURANT FRANCHISEES: 384 130 1,144 248 474 Sales: US$1.3 Sales: US$1.9 Billion Billion 5 LARGEST OPERATORS DHANANI GROUP Sales: US$1.1 Sales: US$1.2 Billion Billion 27 515 807 Sales: US$0.9 271 Billion 79 364 312 U.S. Franchisees 2019 Source: Franchise Times Seale & Associates Creative Solutions. Trusted Advice. INDUSTRY TRENDS • Technologies such as UberEATS or Postmates bring significant growth opportunities to restaurant operators, with digital sales estimated to spike from 6% of overall sales in 2017 to 30% by 2025 • The creation of instagramable dishes and places, amplify its reach by allowing consumers to post pictures in social media • Fast casual dining has become a more popular format and is stealing share from the more traditional formats within the restaurant landscape • Restaurants will increase its openness to delivery service providers • Health, wellness, and sustainability are on the minds of consumers, which means that clean eating staples like meat alternatives and plant-based foods will be more popular • Certain brands expected to reduce franchise fees to better align risk/reward profile with franchisees • Smaller plates and shareables are becoming a new consumption format Seale & Associates U.S. Franchisees 2019 Sources: Restaurant Dive, Forbes, Bakemag Creative Solutions. Trusted Advice. CURRENT MARKET SITUATION COMPARABLE PUBLIC COMPANIES – GLOBAL Annual Average EV / Enterprise 4/2/19 Price Sales EBITDA Mkt. Cap. Company Country Value EBITDA US$M Margin US$M EV / EV / 4/2/19 US$M 2016 2017 2018 EBITDA Revenue YUM! Brands, Inc. USA $100.58 $5,688 33.4% $30,819 $40,578 12.2x 16.3x 18.5x NR NR Restaurant Brands International CAN $65.65 $5,357 39.7% $16,515 $29,821 13.8x 14.5x 13.0x 13.9x NR Inc. Darden Restaurants, Inc. USA $120.48 $8,415 13.9% $14,880 $15,505 9.4x 11.4x 12.7x 13.3x 1.8x Whitbread PLC GBR $66.45 $4,318 25.8% $11,784 $13,045 10.9x 10.2x 10.2x 11.7x 3.0x SSP Group plc GBR $9.12 $3,346 11.1% $4,232 $4,785 10.8x 12.9x 12.7x 12.6x 1.4x Skylark Holdings Co., Ltd. JPN $16.12 $3,339 10.1% $3,176 $4,199 9.2x 9.6x 10.5x 12.7x 1.3x Alsea, S.A.B. de C.V. MEX $2.15 $2,306 14.1% $1,795 $3,122 14.8x 12.4x 11.0x 9.4x 1.3x Dine Brands Global, Inc. USA $92.26 $781 26.7% $1,631 $2,933 10.6x 9.0x 13.0x 14.1x 3.8x AmRest Holdings SE POL $10.76 $1,771 11.2% $2,344 $2,967 12.5x 15.3x 16.4x 15.3x 1.7x Bloomin' Brands, Inc. USA $20.62 $4,126 9.1% $1,889 $2,932 7.4x 7.1x 8.1x 7.8x 0.7x Jubilant FoodWorks Limited IND $20.91 $464 14.4% $2,759 $2,703 NR NR NR NR NR Xiabuxiabu Catering Management CHN $1.66 $688 14.2% $1,765 $1,572 4.7x 10.6x 16.4x 16.1x 2.3x (China) Holdings Co., Ltd. Guangzhou Restaurant Group CHN $4.53 $369 17.9% $1,829 $1,651 0.0x 19.0x 17.6x NR NR Co.,Ltd. Recipe Unlimited Corporation CAN $19.49 $875 17.4% $1,201 $1,519 14.1x 12.0x 10.9x 9.8x 1.7x Café de Coral Holdings Limited HKG $2.51 $1,086 11.3% $1,455 $1,380 14.6x 14.5x 11.1x 11.2x 1.3x create restaurants holdings inc. JPN $12.01 $1,047 9.1% $1,122 $1,346 10.7x 11.1x 12.8x 13.9x 1.3x TORIDOLL Holdings Corporation JPN $20.01 $1,283 9.0% $852 $1,285 8.9x 10.6x 12.9x 11.7x 1.0x BK Brasil Operação e Assessoria BRA $5.81 $607 12.1% $1,304 $1,224 0.0x 24.8x 15.3x 16.7x 2.0x a Restaurantes S.A. The Restaurant Group plc GBR $1.47 $871 12.8% $723 $1,113 6.4x 5.8x 6.0x 9.8x 1.2x Restaurant Brands New Zealand NZD $5.58 $531 12.3% $696 $796 10.4x 11.5x 12.0x 11.8x 1.5x Limited Carrols Restaurant Group, Inc. USA $10.05 $1,179 8.1% $370 $646 8.2x 8.3x 8.0x 6.8x 0.5x Del Frisco's Restaurant Group, USA $6.44 $378 5.7% $215 $543 8.2x 8.3x 9.8x 25.1x 1.4x Inc. Fairwood Holdings Limited HKG $3.52 $372 11.7% $450 $369 10.5x 10.0x 9.1x 8.5x 1.0x SRS Holdings Co.,Ltd. JPN $8.91 $406 6.5% $296 $284 13.4x 16.4x 12.7x 10.9x 0.7x HOTLAND Co.,Ltd. JPN $14.71 $289 6.3% $272 $326 9.4x 12.0x 14.2x 18.2x 1.1x PT. Map Boga Adiperkasa Tbk INA $0.12 $151 14.3% $266 $247 0.0x 17.6x 12.6x 10.9x 1.6x S&P Syndicate Public Company THA $0.60 $235 9.5% $295 $272 12.6x 13.8x 12.8x 11.9x 1.1x Limited International Meal Company BRA $1.69 $409 7.3% $267 $275 7.6x 11.8x 11.1x 8.7x 0.7x Alimentação S.A.