skills/full-company-analysis/references/modules/M096-restaurants-analyst-playbook.md

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<!-- Module: 096 | Title: Restaurants Analyst Playbook -->

## PART XV - SECTOR PLAYBOOKS | MODULE 096

# Restaurants Analyst Playbook

> Mission. Build a sector-specific research system for Restaurants that converts operating data into financial outcomes, highlights the accounting areas most likely to distort comparability, and selects valuation methods that reflect the sector's economics.

## Economic engine and binding constraints

Model units, same-store sales from traffic and ticket, mix, food/labor/occupancy cost, franchise economics, unit openings/closures, development cost, payback, and digital/loyalty. Avoid mistaking price-led comps for healthy traffic.

## Primary KPI stack

| KPI | Construction / analyst control |
| --- | --- |
| same-store sales | Sales growth for locations operating in both comparison periods under a consistent eligibility definition, decomposed into traffic and ticket where possible. Validation: Tie the dollar measure to filed statements/footnotes; reconcile classification adjustments, one-time items, acquisitions/FX, and period consistency before using it analytically. |
| traffic | Customer visits or transactions at comparable locations, usually expressed as year-over-year % change using a constant-store base. Validation: Tie physical/operating units to company disclosures or source-system data; reconcile beginning/ending populations where applicable and test scope, ownership, and period consistency. |
| ticket | Average sales per transaction/order, equal to comparable sales divided by comparable transaction count. Validation: Recalculate price/cost from underlying dollars and physical units; test mix, rebates, FX, timing, and unit-definition effects; reconcile to reported revenue or expense. |
| unit growth | unit growth = current period / comparable prior period - 1; decompose organic, price, volume, mix, FX, and M&A where material. |
| restaurant margin | restaurant margin = relevant profit or cash-flow numerator / relevant revenue base, using a consistent definition. |
| labor | Labor expense divided by sales, or labor hours/cost per unit, with wage rate and productivity separated. Validation: Recalculate independently from cited source data; verify definition, period, units, scope, signs, and any reconciliation to reported financial or operating totals. |
| food cost | Food and beverage input cost divided by restaurant sales, adjusted for commodity inflation, waste, and menu mix. Validation: Recalculate price/cost from underlying dollars and physical units; test mix, rebates, FX, timing, and unit-definition effects; reconcile to reported revenue or expense. |
| franchise mix | Franchised units, system sales, or franchise revenue divided by total system units/sales/revenue as defined. Validation: Recalculate from same-scope numerator and denominator; confirm period, units, cohort/geography, and issuer definition; reconcile material differences to filings or operating data. |



## Sector-specific accounting and comparability traps

- Lease accounting: reconcile issuer treatment with peer treatment and quantify the effect on reported growth, margin, cash flow, capital, or valuation before comparing outputs.

- Pre-opening expense: reconcile issuer treatment with peer treatment and quantify the effect on reported growth, margin, cash flow, capital, or valuation before comparing outputs.

- Impairments: reconcile issuer treatment with peer treatment and quantify the effect on reported growth, margin, cash flow, capital, or valuation before comparing outputs.

- Franchise accounting: reconcile issuer treatment with peer treatment and quantify the effect on reported growth, margin, cash flow, capital, or valuation before comparing outputs.

- Loyalty deferrals: reconcile issuer treatment with peer treatment and quantify the effect on reported growth, margin, cash flow, capital, or valuation before comparing outputs.

## Valuation frameworks

- EV/EBITDA: enterprise value divided by normalized EBITDA; adjust leases, pensions, minorities, recurring restructuring and capital intensity before peer comparison.

- P/E: common equity value per share divided by normalized diluted EPS; normalize taxes, one-time items, dilution, cyclicality, and non-operating income.

- Unit-economics DCF: forecast customers/units by cohort, ARPU/ticket, retention, contribution margin, acquisition cost, payback, fixed costs, reinvestment, and mature cohort economics.

## Sector diligence questions

- What is the most important leading indicator for Restaurants, and how many months does it lead reported revenue or cash flow?

## Sector stress and falsification

- Stress same-store sales and traffic together in the direction most likely to break the equity story; flow the result through working capital, capex, liquidity, financing, dilution, and valuation.

- Explicitly test lease accounting. Determine whether it can make the reported sector comparison look better or worse without equivalent economic change.

## 99-point standalone execution extension

### Model architecture and forecast chain

Model units, same-store sales from traffic and ticket, restaurant margin, labor, food, occupancy, new-store ramp, closures, franchise mix, and capex.

### Leading-indicator dashboard

Track traffic, menu pricing, promotions, commodity inputs, wage inflation, unit openings, franchisee health, digital mix, and consumer spending.

### Primary-source map

SEC filings; Bureau of Labor Statistics wage/CPI data; Census retail/food-service sales; public menu pricing; location openings/closures; franchise disclosures where public.

### Accounting normalization test

Franchise versus company-store mix, gift cards, leases, closure costs, and preopening expense change comparability.

### Valuation implementation

Use unit-level DCF, EV/EBITDA/FCF, and growth-adjusted frameworks tied to new-unit returns and mature store economics.

### Worked numerical mini-case

> Illustrative comp-sales case.

Traffic declines 4% while menu price rises 6% and mix adds 1%, producing roughly 3% comparable sales before interaction. If restaurant-level labor/food inflation totals 5%, positive comps may still produce margin compression.

Separate company-owned and franchised economics, new-unit maturation, closures and cannibalization.

### Monitoring and falsification cadence

Breaks include traffic elasticity to price, unit cannibalization, labor inflation, weak franchisee economics, or declining new-store cash-on-cash returns.

At every quarterly update, rebuild the driver bridge from operating units to revenue, margin, cash flow and valuation; compare leading indicators with the prior forecast; record definition changes; and precommit the threshold that would trigger a thesis reset rather than a cosmetic estimate change.

## Sector exit standard

The Restaurants work is complete only when the analyst can explain the business in its native operating units, reproduce the KPI history, identify the binding growth constraint and marginal price setter, normalize sector-specific accounting, quantify a coherent adverse case, and translate the current market price into the operating expectations that must be met or exceeded.