When Drive-Thru Won´t Do: Due Diligence For Quick-Service Restaurant Operations

The continuing merger and acquisition activity in the middle market stems in part from private equity and strategic investors' targeting larger quick-service restaurant (QSR) franchisees. These operations, which often comprise many individual stores, pose particular challenges to performing due diligence. Author Adam Haberman provides an overview of effective financial due diligence for transactions involving QSR franchisees.

The National Restaurant Association predicts that sales at QSRs – generally defined as locations where the primary function is to provide full meals without table service – will hit $156.8 billion in 2008, a gain of 4.4 percent over 2007.¹ With national QSR chains enjoying soaring profits,² QSR franchisee operations are attracting the potential interest of private equity and strategic investors within the middle market.