Consolidation Likely To Hit Restaurants via Labor Inflation, Rates And Franchisee Powershift (MCD) (THI) (JACK) - Mizuho
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Mizuho analyst, Jeremy Scott, called out Consolidation as the key theme for the restaurant industry going forward expecting the bottom 5% of US restaurants to struggle to survive the coming ~25% labor inflation over the next five years. Add to this, the acceleration of site buildout funded by low interest rates and a shift in franchisee power as franchisees consolidation, within chains, has led to
more frequent groundswells of resistance impacting McDonald's (NYSE: MCD), Tim Hortons (NYSE: THI) and Jack in the Box (NASDAQ: JACK).
The analyst stated "Operators are weighing more elevated price hikes in 2019 intended to offset labor costs against a seemingly unrelenting promotional environment, setting up a year of volatile traffic patterns as the gap to retail prices rises again".
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