Despite lower M&A deal volume in the restaurant industry compared to recent years, strategic opportunities continue for well-positioned operators and investors. The current environment reflects increased selectivity, renewed buyer discipline, and heightened attention to post-acquisition integration and tax efficiency.

Restaurant owners preparing for a transaction can strengthen outcomes by anticipating today’s diligence expectations and aligning with the latest tax, structural, and technological changes.

Here are key considerations for owners and investors looking to take advantage of the current market:

• Restaurant M&A market conditions
• What buyers prioritize
• Preparing for a sale
• Common seller pitfalls
• Deal structure trends
• Key risk areas
• Post-acquisition integration
• Looking ahead

Restaurant M&A Market Conditions

The current restaurant M&A landscape remains divided between scalable, tech-enabled growth concepts and operators facing margin compression. Larger concepts with many units continue to drive the majority of deal flow in the market, particularly in franchise-driven or fast casual segments.

While deal volume has moderated overall, activity remains strong among models that leverage technology for operational efficiency, including advanced POS integration, AI-based labor and inventory management, and digital ordering ecosystems that enhance off-premises performance.

Buyers are increasingly viewing digital maturity as a core driver of scalability and valuation, making data transparency, loyalty platforms, and automation key differentiators in today’s environment.

Macroeconomic pressures—particularly labor costs, inflation, and interest rates—continue to influence deal timelines and valuations. However, recent tax law changes under the One Big Beautiful Bill Act (OBBBA) have reintroduced some tailwinds, particularly around depreciation and interest deductibility, that may modestly enhance buyer appetite and transaction value for capital-intensive operators.

Private equity participation remains selective but has rebounded slightly as financing conditions stabilize. Sponsors are favoring concepts with proven off-premises performance and data-driven operating models. Strategic buyers and multi-brand platforms remain the most active participants in the market, often pursuing bolt-on acquisitions that deliver operational synergies or geographic scale.

What Buyers Prioritize

Buyers in the current market are placing greater emphasis on:

• Margin stability and consistent trendlines
• Same-store sales growth and unit-level profitability
• Operational scalability synergies and digital readiness
• Leadership continuity, management strength, and cultural fit

Concepts with expansion potential, whether through new units or improved store-level economics, are receiving the most attention. In addition, buyers are incorporating new tax modeling under the OBBBA’s updated expensing and interest rules, which can influence deal structure and timing. Enhanced bonus depreciation and permanent Section 179 expensing thresholds are prompting some acquirers to revisit capital improvement timelines or reinvestment strategies post-close.

Modern buyers are also prioritizing data transparency, technology enablement, and ESG alignment as part of their diligence lens. Restaurant platforms that can demonstrate reliable unit-level reporting, integrated digital ordering systems, and sustainable operating practices are increasingly viewed as lower-risk and higher-value opportunities.

Due diligence processes have evolved significantly. In contrast to the post-COVID period when diligence was often expedited, current buyers are extending timelines and applying closer scrutiny. Issues that might have been overlooked in 2020 are now potential deal-breakers.

Preparing for a Sale

Restaurant owners, whether corporate-owned or a franchisee group, considering an exit within the next one to two years are advised to begin strategic preparation now. Key steps include:

• Improving store-level margins and verifying addbacks for non-recurring costs; Standardizing accounting and financial reporting systems across units
• Ensuring tax compliance and evaluating entity structure for potential tax efficiencies prior to a sale
• Upgrading systems where appropriate, such as transitioning from QuickBooks to a more scalable ERP system
• Conducting a sell-side diligence review, including quality of earnings and tax readiness, to identify gaps or inconsistencies
• Documenting one-time events, or run-rate changes to support adjusted EBITDA and valuation analyses

Under the OBBBA, permanent 100% bonus depreciation and an increased Section 179 expensing threshold can affect the presentation of historical and projected capital expenditures. Sellers should coordinate with advisors to accurately reflect these impacts on pro forma financials and to evaluate how transaction structure—such as stock vs. asset sale, or the use of rollover equity—may influence after-tax proceeds.

Early engagement with tax and transaction advisors can help optimize basis step-ups, minimize recapture exposure, and model buyer tax benefits to enhance negotiation leverage. Sellers should also maintain a record of discretionary or non-operating expenses such as personal vehicles or family salaries, that could be adjusted out of the financials during the transaction process.

Common Seller Pitfalls

Transactions can be delayed or derailed by several recurring challenges, including:

• Incomplete or delayed access to financial and operational data
• Lack of internal resources to support buyer diligence requests
• Mismatched valuation expectations due to insufficient preparation or benchmarking
• Outdated technology or point-of-sale systems that limit visibility into unit level performance
• Inconsistent working capital management or lack of normalization across locations
• Inadequate consideration of carve-out issues

Early coordination with transaction and tax advisors remains critical. Incorporating law tax modeling and structuring considerations under OBBBA, such as revised interest deductibility and R&E expensing rules, can help narrow expectation gaps and streamline negotiations. Proactively addressing these operational and data readiness issues can materially improve deal confidence and shorten diligence timelines.

Deal Structure Trends

Stock sales continue to dominate, especially in franchise group acquisitions where continuity of licenses and relationships is essential. Asset sales are less common due to the complexity of transferring location-specific permits, leases, and agreements.

To address valuation gaps, earnouts are frequently used—tying part of the seller’s proceeds to future performance metrics. Rollover equity is occasionally utilized in larger, high-growth opportunities, especially where management is expected to remain active post-transaction.

Seller financing may also be employed in situations where buyers are unable or unwilling to meet valuation expectations through traditional means. These structures typically involve deferred payments, subject to business performance.

Key Risk Areas

Buyers are increasingly focused on identifying and mitigating exposure in several high-risk areas:

• Lease structures, including assignability, renewal terms, and escalation clauses
• Labor and wage compliance, particularly employee classification, tip pooling, and overtime exposure
• Inconsistent unit-level performance reporting or lack of systemwide data visibility
• Unresolved tax liabilities or underreported obligations, including state nexus and sales tax compliance
• Technology and data security vulnerabilities
• Supply chain concentration risks

Restaurant groups seeking a transaction should proactively address these areas to maintain buyer confidence and reduce execution risk.

Post-Acquisition Integration

Beyond valuation and deal structure, the most significant driver of long-term success in restaurant M&A remains post-acquisition integration. Operators and investors alike are realizing that even the best-priced deal can quickly lose value without a deliberate integration playbook.

The most successful acquirers are now prioritizing the alignment of POS and back-office systems, harmonization of supplier and distributor contracts, and consolidation of digital platforms—from loyalty programs to delivery channel management.

Labor integration is another critical area, as merging teams with distinct wage structures, scheduling systems, and cultures can lead to operational disruption if not carefully managed.

In recent transactions, buyers are increasingly engaging dedicated integration specialists early in the diligence phase to map technology migration, identify redundant systems, and preserve brand consistency across franchise networks. With heightened emphasis on technology, ESG reporting, and real-time financial visibility, integration planning is now as much about data and automation as it is about people and process.

Looking Ahead

The restaurant M&A market is expected to remain steady through early 2026, with well-capitalized buyers continuing to seek efficient growth opportunities. While elevated borrowing costs and selective underwriting persist, the long-term fundamentals of the industry—particularly for differentiated, operationally disciplined brands—remain strong.

Tax law stability following the OBBBA may provide a period of predictability for transaction planning, enabling both buyers and sellers to optimize structures and timing. In addition, technology integration, data analytics, and sustainability initiatives are increasingly influencing valuation and deal structure, as investors favor brands that demonstrate digital maturity and long-term operational resilience.

With thoughtful preparation, transparent reporting, and a realistic understanding of evolving market conditions, restaurant operators can position themselves for success in this next phase of industry consolidation.

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Additional Resources

• Restaurant Practice
• Transaction Services