The quick-service restaurant (QSR) sector is expected to see a significant uptick in activity over the course of 2021, according to BDO’s annual Restaurants & Bars Report.

QSR was well placed to absorb some of the market shocks last year, with both franchisors and franchisees looking to deploy growing cash reserves in the second half of 2020, in order to drive growth across multiple channels, said Samuel Otterburn, assistant director, M&A at BDO.

This investment is forecast to ramp up over the remainder of this year as operators look to put their capital to work and investors seek existing platforms primed for growth across multiple brands.

Increasing use of drive-thru formats was also a trend seen last year, particularly in relation to fast-food chains. Otterburn said that if UK consumers continued to gravitate towards these formats, and habits become entrenched, “the opportunity for the growing segment is clearly vast”.

“In addition to drive thru formats, the early adoption of technology, well developed delivery propositions and access to significant above store operational synergies have made the sector particularly resilient to pandemic pressures,” he said.

Despite the tough trading conditions last year, the overall restaurant, pub and bar sector also continued to attract investment, as optimism about the future of the industry was driven by the prospect of lockdown restrictions and a successful vaccine roll out.

M&A activity in 2020 was dominated by distressed transactions, as restaurant and bar values dropped significantly – from around 7x-8x EV/EBITDA multiples pre-COVID to just 1x-2x in Q2 2020. This, in turn, attracted investors who were encouraged by a reduced competitor landscape, better rental terms and emergence of new sales channels, according to the report.

Mark Edwards, partner and head of the restaurants and bars sector at BDO LLP, said: “There is no denying that the next few months are going to be incredibly difficult for the hospitality sector but for those that can survive, there will be opportunities to stabilise and prosper once the lockdown lifts.”

Commenting on the landscape for the year ahead, Edwards added: “It is clear that some consumer habits will have changed permanently and as operators look to rebuild, we fully expect operators to look at reduced labour, more flexible property costs and the use of technology as priorities, while a sharper focus on menu and customer offer will also be essential.”