The Chefs' Warehouse Inc.

The stable outlook reflects our expectation that Chefs' Warehouse will adhere to financial policies consistent with maintaining leverage below 5x. We expect the company will remain focused on growth both organically and through tuck-in acquisitions, and that shareholder returns will not be a priority in the near term. We also believe the company will maintain healthy and consistent profit margins by successfully managing moderate food and fuel cost volatility, as well as rising labor costs. We could lower the rating if we forecast debt to EBITDA will increase and remain above 5x, which could occur if the company adopts more aggressive financial policies (a large debt-financed acquisition or shareholder payment, for example), or if it struggles to manage food input

...We expect Chefs Warehouse Inc. (Chefs') to maintain steady credit metrics and financial policies commensurate with the rating. We expect Chefs' to maintain its steady pace of organic case volume growth, supplemented by acquisitions and modest inflation. The company has significant room for growth in underpenetrated regions and, in our view, will maintain a heavy pace of investment to build scale and infrastructure in these markets. The company will do this through a mix of organic investment and bolt-on acquisitions. While we expect most of the growth will come from bolt-on acquisitions, we recognize the potential for Chefs' to pursue larger opportunities. However, we expect the company would raise equity capital to partially fund a large acquisition if necessary to avoid significant credit metric deterioration. Given its focus on growth, it is unlikely that the company will begin to pay a dividend or repurchase shares over the next few years. As such, we forecast the company will maintain...

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