Restaurant Market M&A Update – October 2025

Value and Health Perception Dictate Performance in the Restaurant Market, M&A Activity Bifurcated

The Restaurant market has experienced choppy foot traffic as tariff volatility and macroeconomic concerns have pressured discretionary spending and tempered merger and acquisition (M&A) activity. This backdrop has necessitated increased value positioning to convince consumers to dine out rather than make home cooked meals. Restaurant concepts with strong perceived value have seen sales and traffic growth, with the Casual Dining segment experiencing best-in-class growth to date. Moreover, an increasingly health-conscious customer base has provided business owners positioned at the intersection of health and value to capture wallet share.

Despite a choppy consumer backdrop, investors continue to reward restaurant brands that marry health, value, and operational discipline. Concepts that can articulate a credible value proposition—supported by strong unit economics and scalable infrastructure—are proving to be the most resilient. The bifurcation we’re seeing in today’s M&A market underscores how buyers are gravitating toward asset-light, capital-efficient franchisors with proven pricing power.

Kenny GreenDirector, Capstone Partners

Value-Seeking Behavior Supports Casual Dining Segment, Operators Marrying Health and Value Positioned Well for Future Growth

Macroeconomic headwinds in year-to-date (YTD) 2025 have induced value-seeking consumption behavior in the Restaurant market, uplifting sales in a challenging discretionary spending environment for restaurant operators with airtight value perceptions. Notably, the average check size has increased across all Restaurant segments through YTD, indicating consumers have expressed propensity to spend when looking for dining experiences, though visits may be less frequent, according to Black Box Intelligence.¹ The Quick Service Restaurant (QSR), Fast Casual, and Fine Dining segments have all experienced flat or negative same-store sales (SSS) growth on average to date as a result of these shifting consumption patterns and cautious discretionary spending. However, QSR segment participants have seen 1.5% and 1.8% year-over-year (YOY) SSS growth in July and August, respectively, boosted by average check size increases offsetting declining or flat traffic. The Fast Casual and Fine Dining segments have also experienced negative or flat traffic growth in the first eight months of the year, underscoring limited up-sell ability, misaligned value proposition, or general consumer budget tightening. Conversely, the Casual Dining segment has displayed strength YTD with SSS rising by more than 3.1% YOY in seven of the past eight months. Visits at casual dining concepts have increased YOY since March, with the trend strengthening over June, July, and August. This performance highlights increased consumer focus on value beyond just price point, factoring in dining experience, food quality, and health.

Casual dining operators have employed a more conservative approach to pricing since the pandemic, during which many businesses kept below-inflation pricing strategies. This approach has enabled the segment to take share from the QSR and Fast Casual categories to date while still seeing average check sizes rise. In contrast, the more aggressive approach to price hikes in the QSR and Fast Casual segments has narrowed the pricing gap between these categories and Casual Dining, causing many consumers to view casual dining as a more valuable experience for their money. With affordability and value top of mind heading into the end of 2025 and into 2026, restaurant operators across segments will likely remain focused on menu innovation and optimized dining experiences to defend market share, drive traffic, and build customer loyalty.

Demand for healthy meals has continued to rise in conjunction with general health and wellness trends that emerged out of the pandemic in 2020. The majority (77%) of Americans would like to eat a healthier diet, but the cost of healthy food prevents many households from doing so, according to a 2024 Research!America and American Heart Association joint survey.² Sector participants that balance health and affordability will likely be able to capitalize on Americans’ demonstrated ambition to eat healthier diets and improve nutrition. Many operators have deployed health and value menu engineering and targeted marketing in an attempt to drive above market growth in the mature Restaurant sector. Moreover, these efforts have helped target middle- to high-income consumers, who are more likely to pay up when value is explicit and ingredient transparency is credible. Lighter builds—wraps, bowls, grilled chicken, smaller portions—have helped shape menus for healthy value positioning while clean ingredient marketing and packaging appeal to the increasingly health-conscious U.S. consumer.

Olive Garden, owned by Darden Restaurants (NYSE:DRI), began testing reduced-size versions of seven entrees at a cheaper price point in June 2025, underscoring these trends toward health and value. The company reported affordability scores increasing 15 percentage points and high satisfaction with portion size, supporting SSS growth of 5.9% in the quarter, according to the company’s earnings call.³ Other sector participants have followed suit, with Noodles & Company (Nasdaq:NDLS) rolling out “Delicious Duos” starting at $9.95 where guests can choose from any small noodle bowl, add a protein, and add a side such as a Caesar Salad, a new Garden Salad, Lemon Parmesan Broccoli, and Chicken Noodle Soup, according to a press release.⁴ The company believes this offers a more balanced meal with a smaller noodles portion and a light, fresh side. Additionally, Chipotle Mexican Grill’s (NYSE:CMG) marketing efforts have emphasized its health and value proposition, highlighting its handcrafted, made-fresh chicken bowls priced at a 20%-30% discount to comparable Fast Casual and QSR segment options, according to its Q2 2025 earnings call.⁵ Capstone expects operators with menus at the intersection of health and value to see near-term strength from middle- to high-income consumers, long-term growth, and increasing acquirer interest.

Restaurant Market M&A Remains Bifurcated, Franchisor Dealmaking Expands

Uncertainty and the impact of newly introduced tariffs on discretionary spending have contributed to a slower, bifurcated M&A market for restaurant operators. Total sector deal volume has declined 28.9% YOY to date, with 32 announced or closed transactions. The muddied outlook on consumer behavior amid shifting tariff rates and a cooling job market have created a more cautious buyer universe. Prospective acquirers have largely targeted asset-light operators with a substantial portion of locations franchised to receive insulation from traffic changes and reap the benefits of more stable cash flows amid the market volatility. Moreover, these businesses require less development capital from the acquirer as they can rely on franchisees for new unit footprint expansion. Larger, global brands with a long operating history have also seen more stable acquirer interest. As a result of this buyer sentiment, Franchisor segment deal activity has increased by 4 deals YOY to 21 transactions, or 65.6% of total sector deal volume. Meanwhile, the Franchisee and Independent Brand segments have seen acquisition activity decline by nine and six transactions YOY, respectively.

Strategic Buyers Lose Restaurant Market M&A Share to Private Equity

Strategic buyer activity in the space has declined 37.1% YOY to 22 transactions YTD. Despite driving the majority (59.4%) of sector deal flow, private strategic acquisitions have declined from 31 deals in YTD 2024 to 19 in YTD 2025. Meanwhile, public strategic appetite has remained stable, falling by one deal YOY to three transactions. These buyers have expressed more timid interest in acquiring smaller chains with majority company-owned stores, hesitant to take on operations and development responsibilities amid inflationary build costs and slower payback periods. Notably, projects that once hit payback in two or three years may now take four or five years due to the structurally higher capital investment per unit. Larger franchised operations and their stable cash flows have remained highly attractive but business owners with the capital and willingness to commit to a larger acquisition have shrunk, contributing to the decline in sector-wide strategic dealmaking.

Private equity (PE) activity has ticked higher YOY, rising to 10 deals YTD compared to eight in the prior year period. Platform acquisitions have risen 66.7% YOY to comprise all of PE sector dealmaking to date. The absence of add-ons to date has represented a small decrease, with YTD 2024 seeing just two of these transactions. Platform deals have comprised a record proportion of total Restaurant sector dealmaking, reaching 31.1% of all transactions in YTD 2025. Three of the 10 PE deals to date have been sponsor-to-sponsor transactions, the highest composition on Capstone’s record. In comparison, secondary buyouts have only accounted for 16.8% of PE deals between 2018 and YTD. Robust levels of dry powder, as well as interest rate cuts in 2024, have enabled the asset class to capitalize on more tepid acquisition appetite from strategics, resulting in the stronger presence of secondary buyouts. The Restaurant market has seen four M&A exits from PE groups to date, matching the prior year period’s tally. Notably, the average enterprise value of PE M&A exits has jumped considerably in recent periods. Between 2018 and 2021, the average enterprise value of PE M&A exits landed at $436.6 million. In the 2022 to YTD period, this figure has jumped 110.7% to $920.1 million. This trend underscores the current M&A market bifurcation with large scale franchisors remaining highly attractive and driving deal activity.

Large-Scale Franchisor Deals Headline Sector M&A, Middle Market Activity to Rebound in 2026

Large franchisor transactions have captured headlines in YTD 2025 as buyers remain willing to deploy substantial capital for targets with a combination of lean balance sheets, operational history, brand equity, and high systemwide average unit volume (AUV). As macroeconomic pressures ease, Capstone expects the demonstrated acquirer appetite for attractive assets in the Restaurant market to transition down to middle market businesses. Favorable tax legislation, digestion of tariff policies, and interest rate cuts will likely support growth efforts and stoke additional M&A moving into 2026. Select transactions that have depicted Restaurant market M&A trends in YTD are outlined below.

• RaceTrac to Acquire Potbelly (September 2025, $689 Million, 1.5x EV/Revenue, 8.6x EV/EBITDA) – Convenience store and fuel retailer RaceTrac, announced its acquisition of sandwich shop franchisor Potbelly (Nasdaq:PBPB) for $689 million, equivalent to 1.5x EV/Revenue and 8.6x EV/EBITDA in September 2025. Potbelly offers sandwiches, salads, and shakes in its fast casual concept, operating more than 445 company- and franchise-owned shops across the U.S, according to a press release.⁶ The company was founded in 1977, began franchising in 1996, and aims to grow its store count to 2,000 units. Notably, 76% of locations system-wide exceeded $1 million in AUV in 2024, according to Potbelly.⁷ The acquisition underscores growing consumer demand for made-to-order foodservice offerings in the Convenience Store channel. RaceTrac operates more than 800 convenience stores under its RaceTrac and RaceWay brands. The combined entity is expected to realize synergies through its complementary strengths in real estate, franchising, operations, food innovation, and marketing. Notably, Potbelly will remain a separate brand under the new ownership. “RaceTrac’s strategic vision including their commitment to quality align perfectly with our mission to delight customers with great food and good vibes. We have positioned Potbelly for accelerated franchise-led growth in recent years, and this transaction fortifies our path while delivering certain and immediate value to our shareholders,” said Bob Wright, CEO of Potbelly, in the press release.
• Rhone Group Acquires Freddy’s Frozen Custard & Steakburgers (September 2025, ~$700 Million, ~0.7x EV/Revenue) – In September 2025, PE firm Rhone Group acquired fast casual concept Freddy’s Frozen Custard & Steakburgers from Thomspon Street Capital Partners for approximately $700 million, equivalent to ~0.7x EV/Revenue. Freddy’s operates more than 550 fast casual burger locations in the U.S. and recently Canada, after opening its first international location in Winnipeg in June, according to a press release.⁸ Under Thompson Street’s ownership, the company focused on improving AUV, kitchen operation efficiency, consumer digital platforms, menu innovation, and franchisee support to drive growth. The company reported system-wide AUV of $1.9 million in 2023, according to a company publication.⁹ Rhone is expected to help footprint expansion, particularly in untapped global markets. “Rhone looks forward to bringing its experience with global consumer brands to its most recent investment in Freddy’s as the company expands its footprint and further improves its guest experience. We see a compelling opportunity to partner with Chris [CEO of Freddy’s] and the rest of the leadership team to help bring the unique Freddy’s offering to more customers around the world and support the company in this next chapter of growth,” noted Lucas Flynn, Managing Director at Rhone, in the press release.
• Levine Leichtman Capital Partners Acquires Shipley Do-Nut (July 2025, Undisclosed) – Levine Leichtman Capital Partners (LLCP), a middle market PE firm, acquired Shipley Do-Nuts from financial sponsor Peak Rock Capital for an undisclosed amount (July 2025). Shipley, founded in 1936 and franchising since 1987, offers donuts, kolaches, and coffee in more than 375 locations across a 14-state footprint, according to a press release.¹⁰ The brand achieved its 18^th consecutive quarter of positive sales growth in Q2 2025 while opening 16 new locations in the first half of 2025, according to a press release.¹¹ Moreover, Shipley reports its top 50% of stores boast AUV of $1.2 million, according to its website.¹² “Shipley has delivered robust recent growth and continued to build upon a strong reputation for fresh products and customer service that it established over its nearly 90-year operating history. Flynn [CEO of Shipley] and the rest of the management team have had tremendous success, and we are excited to leverage our extensive experience investing in the Franchising space to pursue various growth initiatives alongside them,” said Greg Flaster, Managing Director at LLCP, in the press release.

Notably, LLCP exited better-for-you fast casual concept Tropical Smoothie Café in April 2024, selling the asset to Blackstone (NYSE:BX) for an enterprise value of $2 billion, equivalent to 20.0x EV/EBITDA. LLCP acquired the business in August 2020 and grew its store count from 870 to more than 1,400 locations, according to a press release.¹³ Blackstone’s buyout of Tropical Smoothie Café underscores the active secondaries market in the Restaurant space and robust PE interest scaling chains with strong fundamental growth profiles.

• Thompson Street Capital Partners Acquires Bubbakoo’s Burritos (June 2025, Undisclosed) – In June, PE firm Thompson Street Capital Partners acquired Bubbakoo’s Burritos, a New Jersey-based franchisor of a fast casual Mexican-fusion concept. Terms of the transaction were not disclosed. Bubbakoo’s was founded in 2008 and began franchising in 2015, expanding to more than 130 locations across 15 states, according to a press release.¹⁴ The concept is known for signature burritos, such as its Honey Sriracha Chicken Burrito and General Tso’s Crispy Chicken Burrito, and also offers customizable bowls, quesadillas, burritodillas, tacos, salads, nachos, chiwawas, and vegetarian meals. Bubbakoo’s reports $1.1 million in AUV across its company-owned and franchised networks, according to its franchise guide.¹⁵ “Thompson Street Capital Partners brings deep experience in scaling founder-led businesses and shares our passion for supporting franchisees and delivering great experiences to customers. With their support, we’re confident Bubbakoo’s can accelerate its growth into new markets, invest in technology and infrastructure, and continue building a world-class franchise system,” said Paul Altero, Co-Founder of Bubbakoo’s, in the press release.

Consumer sentiment will likely be watched closely by Restaurant market operators for the remainder of 2025 and into 2026 while business owners continue to refine offerings around value and health trends. M&A activity, while bifurcated YTD, has continued for middle market concepts with operational efficiency, white space opportunities through franchised units, and above market traffic growth. Buyer selectivity and scrutiny are expected to subside as discretionary spending pressures ease, bringing forth appetite for more capital intensive, high growth investments, and open more opportunities for business owners looking for a liquidity event.

To discuss value positioning in the current environment, health and wellness trends in the Restaurant sector, provide an update on your business, or learn about Capstone’s wide range of advisory services and Restaurant market knowledge, please contact us.

Andrew Woolston, Associate, was the lead Market Intelligence contributor to this article.

Endnotes

1. Bloomberg, “Restaurants Dashboard, Industry Data Library, Black Box Intelligence,” https://www.bloomberg.com/professional/terminal-introduction/, accessed September 17, 2025.

2. Research!America, “National Survey Shows Affordability and Access to Nutritious Foods is a Challenge for Many Americans,” https://www.researchamerica.org/press-releases-statements/national-survey-shows-affordability-and-access-to-nutritious-foods-is-a-challenge-for-many-americans/, accessed September 17, 2025.

3. Darden Restaurants, “Darden Restaurants FY26 Q1 Earnings Conference Call,” https://event.choruscall.com/mediaframe/webcast.html?webcastid=4nZwpAXI, accessed September 19, 2025.

4. Noodles & Company, “Noodles & Company Unveils Delicious Duos: Perfectly Portioned Combos, Priced Right and Served All Day,” https://investor.noodles.com/news-releases/news-release-details/noodles-company-unveils-delicious-duos-perfectly-portioned, accessed September 19, 2025.

5. Chipotle Mexican Grill, “Chipotle Mexican Grill Second Quarter 2025 Results,” https://app.webinar.net/yP0VNLGpMeE, accessed September 19, 2025.

6. Potbelly, “Potbelly Corporation to be Acquired by RaceTrac in Approximately $566 Million Transaction,” https://investors.potbelly.com/news-releases/news-release-details/potbelly-corporation-be-acquired-racetrac-approximately-566, accessed September 17, 2025.

7. Potbelly, “Multi-Unit Franchising,” https://franchising.potbelly.com/multi-unit-franchise-opportunity/, accessed September 19, 2025.

8. NRN, “Freddy’s Frozen Custard & Steakburgers Acquired by Rhone,” https://www.nrn.com/fast-casual/freddy-s-frozen-custard-steakburgers-acquired-by-rh-ne, accessed September 17, 2025.

9. Freddy’s Frozen Custard & Steakburgers, “How Franchisee Profitability is Driving the Evolution at Freddy’s,” https://www.freddysfranchising.com/news/how-franchisee-profitability-is-driving-the-evolution-at-freddys/#:~:text=Sales%20continue%20to%20tick%20up,of%20all%20of%20the%20above.%E2%80%9D, accessed September 19, 2025.

10. Levine Leichtman Capital Partners and Management Acquire Shipley Do-Nuts,” https://www.llcp.com/levine-leichtman-capital-partners-and-management-acquire-shipley-do-nuts/, accessed September 17, 2025.

11. PR Newswire, “Shipley Donuts Achieves 18^th Consecutive Quarter of Positive Sales Growth,” https://www.prnewswire.com/news-releases/shipley-donuts-achieves-18th-consecutive-quarter-of-positive-sales-growth-302513544.html, accessed September 17, 2025.

12. Shipley Do-Nut, “Why Us?,” https://ownashipleydonuts.com/why-shipley/, accessed September 19, 2025.

13. Private Equity Professional, “LLCP Exits Tropical Smoothie Café,” https://peprofessional.com/2024/05/blackstone-buys-tropical-smoothie-from-llcp/, accessed September 17, 2025.

14. Thompson Street Capital Partners, “Thompson Street Capital Partners Acquires Bubbakoo’s Burritos, a Rapidly Growing Mexican-Fusion Fast-Casual Franchisor,” https://www.tscp.com/news/thompson-street-capital-partners-acquires-bubbakoos-burritos-a-rapidly-growing-mexican-fusion-fast-casual-franchisor/, accessed September 17, 2025.

15. Bubbakoo’s Burritos, “Franchise Opportunity,” https://media-cdn.getbento.com/accounts/3280005f905ec2f2c98fcad22c60f441/media/fDQO3ioEQCeo39OARULM_Bubbakoos%20Spring%202023%20Franchise%20Guide%20%281%29.pdf, accessed September 19, 2025.