To assess the state of US franchise systems, we leverage franchise disclosure documents and other industry data sources to look at quantitative and qualitative factors including unit economics, franchisee to franchisee valuation metrics, interest in growth from franchisees, development incentives, category dynamics, investment costs and US franchise closures. Our focus is on US franchise brands, noting company-owned brands have more control over unit growth outlooks.
Unit economics peaked in 2021 across many brands following strong sales growth and modest commodity & wage inflation in the first half of the year, as well as what we perceive as "skeleton crews," that likely enabled some "over earning," on the labor line.
We recognize parts of our assessment do not capture the challenges posed in 2022, though still should provide important takeaways in understanding the state of franchise systems, with easing costs and further pricing to support a reacceleration in unit economics. We view strong/improving unit economics, high/increasing valuation multiples and favorable category dynamics as positives for future growth prospects.
The proportion of patients starting GLP or GIP-GLP treatment without prior diabetes treatment has risen substantially in recent quarters. Our analysis accords well with historical Novo Nordisk's Wegovy in '21 and Eli Lilly's Mounjaro in '22 commentary and brings the data forward to look at 1Q 2023.
The European utility sector has seen little differentiation in performance across the past three months, with a 9% increase in absolute terms and a 5% outperformance versus the MSCI Europe. Energy prices have fallen, but windfall taxes and price caps introduced in 2022 could limit near-term negative earnings per share (EPS) momentum. But the sector has already de-rated to reflect this.
With the European Green Deal announced in 2019, Europe was the first to declare its ambition to be a climate-neutral continent. COVID-19 and the complexities of European green subsidies meant that considerable funds are still to be deployed. In the meantime, the US Inflation Reduction Act (announced in July 2022) has received significant attention owing to the simplicity of the mechanism and the potential for a more favourable policy to attract investment into the country. This policy move has prompted the European Commission to respond with the proposed Green Deal Industrial Plan (“GDIP”) to mobilise various forms of state aid for the green transition.