CHICAGO--(BUSINESS WIRE)--Link to Fitch Ratings' Report: Rating Restaurant Companies (Sector Credit Factors)
Fitch Ratings has published a sector-specific special report describing the credit factors the agency uses to analyze restaurant companies. Limited-service and full-service restaurants operating in the quick-service restaurant (QSR) and casual dining segments are discussed in the report.
Compared with the aggregate corporate curve, restaurants are viewed as having an above-average risk profile. However, strong company-specific traits can help mitigate some of this risk. Moreover, cash flow metrics and EBITDA margins can be better than similarly rated corporate entities due to limited working capital requirements, resulting from mainly cash transactions, and widespread use of the franchise business model, particularly within the QSR segment.
The sector risk profile can be naturally as high as the 'BBB' rating category with the limited-service subsector viewed as having less risk than the full-service subsector. The restaurant sector's risk profile reflects its overall maturity, economic sensitivity, the effects of commodity food and labor cost inflation, government regulation, and health and obesity concerns. However, company-specific traits and strong financial profiles can result in issuer ratings being as high as 'A'.
The special report 'Rating Restaurant Companies - Sector Credit Factors' is available at www.fitchratings.com or by clicking on the link above.
Additional information is available at www.fitchratings.com.