How to invest in Fast Food? [Guide]

Fast Food is a concept that has gained wide popularity among consumers. Although it seems that the very idea of ​​fast food arose recently, the history of "fast food" is as old as our civilization. For thousands of years, people have wanted to eat quickly and tasty. An example of an ancient quick dish was the famous Isicia Omentata, which was consumed by the Romans several centuries ago. For its preparation, minced meat was fried on a grill, salt, pepper and wine were added. The fried cutlet was put into a roll and seasoned with gurum, i.e. a sauce made of fermented fish. It was an antique version of a hamburger.

White Castle - the first fast food network in the USA.

Before the industrial revolution, fast food outlets were generally local. There was no scale to gain an advantage over fragmented competition. At the turn of the XNUMXth and XNUMXth centuries, the concept of building a chain of restaurants that served a standardized menu appeared. As a result, a customer entering a restaurant with a specific sign could expect "guaranteed" quality and service. The United States has become the true home of the Fast Food chain. Currently, the largest fast food restaurant chains are based mainly in the United States. However, contrary to appearances, the current largest restaurant chains were not the first restaurant chains. The first national chain of burger shops was White Castlewhich works to this day. The beginning of the chain dates back to 1921, when the first restaurant under this banner was established. The chain currently has 377 restaurants in 13 states. Most of them are located in the so-called "Midwest" and in New York City.

Franchising changes the rules of the game

The real rapid growth of the fast food chain came with the adoption of the franchise model. Thanks to it, the development of the network is less burdensome for the brand owner. The capital expenditure is passed on to the franchisees and the brand owners only charge fees as a percentage of the revenue. The franchise network must “only” monitor the quality of the products delivered to the restaurant and require a certain level of service so as not to destroy the brand perception. This solution allows networks to develop faster. At the same time, the franchisor bears the costs of employment and operating activities of the restaurant on the franchisee. As a result, the franchise allows you to generate a very high operating margin and profitability of the invested capital. A large number of restaurant points allows you to gain an advantage over less competition. Thanks to the economies of scale, a large fast food chain can obtain cheaper food, food preparation equipment or sanitary products.

Sometimes the brand owner prefers not to work with individual franchisees. For this reason, the concept appeared Masterfracturers. Such an entity has the right to develop the brand of the restaurant chain in a given area. An example Master Franchisee jest amrest, which develops the KFC or Burger King chain in selected countries.

The largest listed fast food companies

Domino's Pizza

The company is one of the symbols of the successful implementation of sales through digital channels. Domino's Pizza currently has over 17 restaurants operating in over 600 markets. About 90 restaurants operate in the United States alone. The following markets are in terms of size: Indian (1,3 thousand) and British (1,15 thousand). It is worth mentioning that 98% of restaurants (domestic and foreign) are franchised. The company also has Master Franchise agreements, which give exclusive rights to the development of franchise networks in selected areas. Thanks to the introduction of the franchise model, the company has high operating profitability. At the same time, it reduces the sales volume. The company's revenues in 2021 amounted to over $ 4 billion, at the same time sales generated by own and franchised restaurants amounted to $ 16,1 billion. The dynamic development of the Domino's Pizza chain allowed to consolidate the very fragmented pizza market. In the United States alone, Domino's Pizza has a 22% share of the QSR (Quick Service Restaurant) market. Considering the delivery in the USA alone, Domino's has over 36% of the market share.

Domino's Pizza stock chart, interval W1. Source: xNUMX XTB.

McDonald's

McDonald's is a brand-symbol of the Fast Food chain. One of the symbols of the menu of this restaurant chain is "Big Mac". The golden "M" is visible in many countries, both on the main roads and in good locations such as Shopping Centers or places with high "traffic" of potential customers. In 2021, McDonald's operates in 119 countries. At the end of the last financial year, there were 40 restaurants operating in all markets, of which 031 were franchised. Over the last few years, McDonald's has refranged its operations in the United States. As a result, the company was able to improve its operating margin from 29% (2014) to over 42% (2021). McDonald's is aware that consumer habits are changing. As a result, the company focused on cooperation with leading companies operating on the market Food Tech (i.e. food ordering apps). This allows you to sell your products to the next generation of customers. The company is a real cash generating machine, which allows you to pay a generous dividend and buy shares. Thanks to this, the company is still included in the elite group Dividend Aristocrats.

McDonald's stock chart, interval W1. Source: xNUMX XTB.

Yum! Brands

It is a company that, together with its subsidiaries, develops and manages the QSR (Quick Service Restaurant) restaurant chain. The company includes 4 brands such as: KFC, Taco Bell, Pizza Hut and Habit Burger Grill. Thanks to this, the company operates in such segments as: chicken dishes, Mexican cuisine, pizza and burgers. At the end of 2021, the company had 26 KFC restaurants, 934 Pizza Hut restaurants, 18 Taco Bell restaurants and 381 The Habit Burger Grill points. Restaurants from these four brands operate in over 7 countries. In the case of KFC, the most important market for the company is Chinawhich account for approximately 27% of the brand's turnover. The next largest country is American market (18%). In the case of the Pizza Hut brand, sales are concentrated in United States (45% of turnover). The next in terms of size is Chinese market, which generates over 15% of the turnover of the Pizza Hut brand. For the Taco Bell restaurant chain, the business is located in United States, Canada, United Kingdom, China, India or APAC countries. The Habit Burger Grill concept was acquired by Yum! Brands in 2020. The acquired network operates mainly in the United States. Foreign markets are China and Kambodża.

Yum! Brand stock chart, interval W1. Source: xNUMX XTB.

Wingstop

Wingstop is an American chain that serves chicken dishes. Restaurants under this logo mainly serve wings with 11 types of sauces. A characteristic feature is that the dishes are prepared at the time of ordering. The customer has to wait several minutes for the dish. The average unit size is 1750 square feet. About 60% of orders are placed via digital channels. The company intends to increase the share of online sales in the coming years. The reason is $ 5 higher average order value. Wingstop develops mainly through a franchise network, for the rights to the brand it takes 6% of gross revenues of the point. Additionally, Wingstop charges a 5% marketing fee, which it allocates to increase brand awareness globally. The company mainly operates in United States, where 1534 restaurants are operating (as of the end of 2021). Wingstop also operates in foreign markets, where it is based on the principles of Master Franchise. Among the foreign markets can be mentioned Mexico, United Kingdom, Colombia, Indonesia, Malaysia or Singapore.

AmRest

The company is listed on the Warsaw Stock Exchange. It is one of the largest restaurant operators in Europe. AmRest operates as a Master Franchise in 25 countries. The largest turnover is focused on the market Polish (600 restaurants), French (353) Spanish (333) and Russian (267). Amrest is also active in the market Chinese, where it manages 77 restaurants. The most important market in terms of sales is Poland (24% of revenues), followed by France (19%) and Spain (12%) in terms of volume. AmRest has signed franchise agreements with Yum! Brands and Restaurant Brands International. The company franchises, among others brands such as KFC, Burger King or Pizza Hut. AmRest also has its own brands such as The noodle or Blue Frog. It is also worth mentioning that the company also franchises points Starbucks.

AmRest stock chart, interval W1. Source: xNUMX XTB.

Papa John's International

It is one of the most famous pizza chains in the world. Papa John's is one of the four largest pizza restaurant chains in the United States. The network was established in 1984, and in 1993 it debuted on the stock exchange. At the end of 2021, Papa John's owned 5650 restaurants, 600 of which are owned by the company. The company operates in over 50 countries around the world. On the foreign market, Papa John's has 2311 franchise restaurants. Average revenue per restaurant managed by the company amounted to $ 2021 million in 1,3. In turn, the franchised facility generates approximately $ 1,1 million in revenue annually. Papa John's from franchisees has a 5% commission for the so-called "Royalty fee". The standard franchise agreement is signed for 10 years.

Papa John's International stock chart, interval D1. Source: xNUMX XTB.

Restaurant Brands International

It is the fifth largest fast food chain in the world. Restaurant Brands International was established in 2014 as a result of a chain merger Burger King with the Canadian chain of coffee shops Tim Hortons. In 2017, Restaurant Brands International acquired the Popeyes Louisiana Kitchen fast food chain. The company is listed on the New York Stock Exchange and the Toronto Stock Exchange. The most important brand is Burger Kingwhich was founded in 1954 and has 18 restaurants that operate in 600 countries. Tim Hortons is a chain that sells coffee and donuts in 15 countries. In 2021, more than 4900 restaurants operated under the Tim Hortons brand. The third network owned by RBI is Popeyeswhich was acquired for $ 1,8 billion. Popeyes sells mainly chicken and seafood products. In 2021, over 3400 restaurants in over 20 countries operated under the Popeyes brand.

Investing in the Fast Food chain

Stocks and CFDs on stocks

The benefits of developing franchise networks are enjoyed not only by franchisees and franchisors. How to invest in Fast Food? Ideally, by buying stocks of companies that are listed on the stock exchange. Many of the most famous franchise networks are listed on the stock exchange. This gives investors the opportunity to earn on the commercial success of selected restaurants. Buying shares in this industry can be an interesting solution for dividend investors. Many listed companies pay dividends on a regular basis. An example would be McDonald's, which is classified as dividend aristocrats, i.e. companies that increase their dividends per share each year, for a minimum of 25 years.

An alternative may be CFD per share, i.e. contracts for difference, which allow you to trade instruments based on share prices. Retail investors gain the opportunity to buy as well as short sell (play on price drops) of the most popular companies using a leverage of up to 1:20. Due to the fact that the fees on these instruments are higher and they occur swap points, they are more suited to short-term speculation than strategy "Buy and hold".

Investing with ETFs

If the investor does not want to choose the best company himself, he can take advantage of the offer ETFs giving exposure to enterprises operating in the restaurant chain market. One example is a small ETF called AdvisorShares Restaurant ETF. The largest components include: Papa John's, Domino's Pizza, Wingstop and Darden Restaurants. The management fee for this ETF is 0,6% per annum. With additional fees added, the cost of owning an ETF is 0,99%.

Where to invest in stocks of fast food companies and ETFs

An increasing number of forex brokers have quite a rich offer of stocks, ETFs and CFDs for these instruments.

For example on XTB Today, we can find over 3500 equity instruments and 400 ETFs, a Saxo Bank over 19 companies and 000 ETF funds.

Broker
End	Poland	Denmark	Cyprus *
Number of exchanges on offer	16 exchanges	37 exchanges	24 exchanges
Number of shares in the offer	approx. 3500 - shares circa 2000 - CFDs on shares	19 - shares 8 - CFDs on shares	approx. 3 - CFD on shares
The amount of ETF on offer	approx. 400 - ETF approx. 170 - CFD on ETF	3000 - ETF 675 - CFD on ETF	approx. 100 - CFD on ETF
Commission	0% commission up to EUR 100 turnover / month	according to the price list	Spread depends on the instrument
Min. Deposit	PLN 0 (recommended min. PLN 2000 or USD 500, EUR)	0 PLN / 0 EUR / 0 USD	PLN 500
Platform	xStation	SaxoTrader Pro Saxo Trader Go	Plus500 platform
	REVIEW	REVIEW	REVIEW
	CREATE AN ACCOUNT	CREATE AN ACCOUNT	CREATE AN ACCOUNT

* PLUS500 CY offer

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. From 72% to 89% of retail investor accounts record monetary losses as a result of trading CFDs. Think about whether you understand how CFDs work and whether you can afford the high risk of losing your money.