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CIT: 2012 U.S. Restaurant Industry Outlook - Funding Readily Available

February 13, 2012, 08:15 AM
Filed Under: Restaurant

The prolonged recovery of the U.S. economy has forced restaurateurs to adapt to a “new normal,” one in which they are now more efficient and innovative as they have learned to deal with a difficult sales and profit environment. This is one of many topics discussed in CIT’s “2012 U.S. Restaurant Industry Outlook,” featuring Bob Bielinski, Managing Director and head of the Restaurant Industry practice for CIT Group Inc. (NYSE: CIT), a leading provider of financing to small businesses and middle market companies.

“As a result, consumers saw improved quality on food, new product offerings, and value pricing”

The interview is part of the latest installment of CIT’s award-winning “5 Minute Capital” ( podcast series, featuring senior CIT executive commentary on current market conditions and industry trends.

Consumer Experience Has Improved

According to Bielinski, as restaurant companies competed for market share during the prolonged recovery of the U.S. economy, they were forced to get more efficient and innovative as they dealt with the difficult sales and profit

environment. “As a result, consumers saw improved quality on food, new product offerings, and value pricing,” says Bielinski. “In turn, customers are going to keep that better restaurant experience, and the company’s profit margins should be increased when business improves.“

Fewer High-Profile M&A Deals

“M&A activity was good in 2010 and accelerated in 2011, making it an extremely strong year,” says Bielinski. “For 2012 I think you are going to see a slower pace than you have over the past two years. There will be fewer headline transactions because of the dramatic turnover that’s already taken place in private equity portfolios.”

Access to Financing

The outlook for 2012 is that funding will be readily available for restaurant companies and franchisees. “I think debt for large- and middle-market restaurant companies will be readily available in 2012, just like it was in 2011,” says Bielinski. “After a volatile fall and winter, the debt markets closed 2011 in very strong fashion. So long as there isn’t an economic downturn in 2012, lenders will continue to fund restaurant companies.”

Social Media Explosion

Social media has had a huge impact on the restaurant industry, allowing restaurant companies to communicate with their customers, and for their customers to communicate with each other. However, some question the long-term benefits of the daily deal sites. Bielinski comments, “There is a debate among restaurateurs as to whether the Groupon user will become a long-term customer. If the Groupon user is just a coupon chaser and moves from your restaurant to the next restaurant offering a deal, there is not much benefit for the restaurateur.”

To read CIT's 2012 U.S. Restaurant Industry Outlook, click here.

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