2025 Compensation Trends in Portfolio Company Restaurant Brands: Aligning Pay with Performance and Exit Outcomes
In the evolving landscape of private equity backed restaurant brands, 2025 marks a significant shift in how compensation is structured at both the C-suite and VP levels. As competition for returns increases and exit timelines shorten, portfolio companies are redesigning executive pay systems to drive sustainable growth, reduce turnover, and align leadership with value creation.
Unlike public companies, portcos benefit from greater flexibility in designing compensation, but they also carry sharper accountability. In this environment, compensation is no longer just a recruiting tool; it is a strategic weapon for creating enterprise value and building teams that can execute a focused, high-stakes growth plan.
Here, we’ll analyze how C-level and VP-level compensation is evolving in restaurant portcos and outline emerging best practices in aligning incentives with fund-level outcomes.
The Context: PE Pressures and Restaurant Sector Challenges
Restaurant portcos face a demanding and dynamic operating environment:
High inflation and wage pressure continue to squeeze unit-level margins.
AI-driven transformation is forcing rapid digital and operational modernization.
Exit timelines are shortening: funds increasingly target 3–5 year holds, not 7–10.
Growth mandates, especially unit expansion, franchising, and digital scale, are more aggressive than ever.
Talent scarcity is pushing compensation innovation to retain key leaders mid-cycle.
These conditions require a compensation strategy that prioritizes alignment, retention, and impact, especially in the mid-cap and lower mid-market restaurant tiers where PE activity is most concentrated.
C-Level Compensation: Engineered for Equity and Exit
Base Pay and Annual Bonus
C-level pay in portcos tends to be competitive with public peers on base and bonus, but more leveraged to outcomes:
Bonus targets range from 50–100% of base, with payout tied to:
Adjusted EBITDA
Unit growth / franchising milestones
Technology deployment
Team development and ESG targets
Bonuses often include minimum hurdle thresholds (e.g., EBITDA floors), ensuring alignment with debt covenants and fund performance.
Equity Participation and MIPs
Equity is the centerpiece of portco C-level compensation, typically structured through a Management Incentive Plan (MIP). Common features include:
These plans are often backed by phantom equity or profits interests, minimizing dilution but preserving upside for top execs.
| Feature | Typical Structure |
|---|---|
| Equity Participation | 5%–10% of fully diluted equity |
| Vesting | 3–5 years, time + performance-based |
| Exit Event Payout | Triggered by sale, IPO, or recap |
| Performance Hurdles | Often 2x–3x MOIC thresholds |
| Acceleration Clause | Upon change of control (CoC) or termination without cause |
VP-Level Compensation: Focused on Execution and Retention
While C-level pay is designed for long-term alignment with fund outcomes, VP pay is more transactional and retention-based. VPs are expected to execute growth plans at scale, often under intense pressure and within lean operating structures.
Base Salary and Bonus
Base salaries typically range from $175K to $250K, depending on function and geography.
Bonus targets are typically 25–50% of base, based on:
Department-specific KPIs (e.g., labor % for Ops, digital engagement for Marketing)
Unit performance (same-store sales, EBITDA)
Budget adherence and team retention
Many portcos now tier bonus pools by brand region, function, or ownership (company vs. franchise) to drive accountability.
Long-Term Incentives and Retention Tools
Unlike the C-suite, VP-level equity is rare and typically retention-driven rather than value-linked.
| LTI Type | Description |
|---|---|
| Phantom Equity | 0.1%–1.0% with vesting at exit |
| Deferred Cash Bonus | Paid at year 3 if still employed |
| Performance RSUs | Limited use, time-based vesting |
| Stay Bonuses | $50K–$150K retention grants over 24–36 months |
Portcos with multiple PE roll-ups or integrations often use tiered retention packages to reduce disruption during transitions.
Key Trends Reshaping Portco Compensation in 2025
Exit-Aligned Structuring
CEO and CFO packages now regularly include equity waterfalls with tiered payouts based on MOIC or IRR.
Equity vests on time and outcomes: e.g., 50% over 3 years, 50% at exit or EBITDA threshold.
Strategic Use of Phantom Equity
VPs and non-founders receive phantom shares tied to enterprise value growth, aligning them without impacting cap table dynamics.
Retention as a Top Priority
Median VP tenure in restaurant portcos is just 2.4 years, driving increased use of deferred comp and golden handcuffs.
ESG & Operational KPIs in Bonus Plans
ESG metrics are increasingly linked to variable pay.
Ops and HR VPs are being rewarded for metrics like hourly retention, internal promotion rates, and training completion.
Roll-Over and Rollover Rights
In multi-phase PE deals, C-level leaders are negotiating rollover equity rights, carrying ownership into the newco to remain engaged post-exit.
Strategic Implications for PE Sponsors and Boards
For investors and operating partners, 2025 is a year to rethink pay strategy across three dimensions:
| Focus Area | Strategic Question |
|---|---|
| Alignment | Does comp link meaningfully to value creation and IRR goals? |
| Retention | Are we protecting our top VPs through mid-cycle retention levers? |
| Differentiation | Are we overpaying underperformers or under-incentivizing high-impact leaders? |
Portcos with copy-paste compensation structures, will struggle to recruit and retain transformational leadership. High-performing platforms are building tiered, targeted, and transparent compensation models, essential for scalability and investor returns.
Conclusion: Compensation as Capital Strategy
In 2025, executive pay in restaurant portcos has become a proxy for how seriously the business takes its growth, governance, and exit discipline. The best-performing brands aren’t just executing on operations, they’re executing on compensation design, ensuring the right people are incentivized to stay, perform, and drive outcomes that matter to investors.
Boards and sponsors that treat compensation as a capital allocation decision, not an HR formality, will be the ones who deliver true outperformance at the fund level.
