Restaurants face margin contraction, slower M&A in Q1 2022

Given rising commodity prices, workforce shortages, and the need for higher expenditures to attract labor in a competitive market, the restaurant industry will face continued margin contraction and, consequently, lower merger-and-acquisition (M&A) volume in the first quarter of 2022, according to the Restaurant Finance group at Mitsubishi UFJ Financial Group (MUFG).

Slower M&A anticipated in Q1 2022

“Despite strong sales, most restaurant companies have seen their margins erode because of higher food, fuel, labor and transportation costs,” said Nick Cole, head of Restaurant Finance at MUFG. “Additionally, they face increasing difficulty in hiring staff amid persistent labor shortages, which will pose a financial burden as restaurant companies try to draw new workers and retain existing ones in a labor market that is demanding higher wages and being more selective in choosing employers.”

Cole and his team expect lower