There could be meaningful upside to Buffalo Wild Wings and Panera Bread over the next couple years due to the discrepancy in franchisee valuations and publicly traded multiples on restaurant names. Nonetheless, the valuation argument is really hard to enforce unless if the broader market recovers, but given the macro indicators and the frequency of market corrections, it’s fair to assume that a recovery will soon be on the way. Therefore, investors have to look for better opportunities relative to the market, which can be tricky. However, UBS came out with a fairly interesting report when pertaining to restaurant names on Monday:We take a unique look at public versus private sector multiples, believing prices paid by franchisees, who invest life savings for very long durations, offer an alternative way to think about valuations. Analysis of recent franchisee restaurant sales highlights private multiples which are at historical highs relative to recent yrs. However, interestingly the gap between public & private multiples has widened over the last several years as public valuations expanded even more rapidly. Currently BWLD and PNRA maintain among the highest private sector multiples, but also among the smallest publicly traded valuation premiums to private transactions. UBS also mentions that public multiples of BWLD and PNRA is 150% and 205% higher respectively to franchisee sales, which is better than the peer average of 225%. It’s worth mentioning that publicly traded franchisors trade at higher multiples due to other growth drivers like unit growth, product opportunities and corporate level cost saving initiatives. All of these other factors contribute to the premium, but it’s worth noting that both BWLD and PNRA trade at lower premiums relative to the franchisee premium of other restaurant peers, which indicates that both companies could be heavily undervalued. While, I’m not as familiar with both company’s financial statements or sales trajectories I really believe the valuation argument is worth some merit and worth additional investigation among value oriented investors. Furthermore, UBS offers a price target of $200 and $230 respectively for BWLD and PNRA. There could be a lot of upside to both names, but I don’t know enough about either company to offer my own opinion on valuation or offer a recommendation.