Don’t Call It Fast Food: The Pros And Cons Of Investing In Quick Service Restaurants

Quick Service Restaurants (QSRs) are all around us. Toasttab reports that 37% of US Adults consume fast food everyday. In 2022 the market size grew to over 362 billion according to IBIS world. QSRs, like Chipotle, are seeing digital sales increase by over 216% fueled in part by the pandemic. As the industry changes, so too must the busines model and that makes an interesting opportunity for investors.

Let’s Look at the Numbers

As reported by CNN, each day approximately 84.8 million American consume fast food. From 2017 – 2022 the market share for QSRs has grown 3%. Further, Quick Service Restaurants represent 50% sales in the restaurant sector.

While most of us know them as fast food restaurants, the industry refers to them as Quick Service Restaurants or QSRs. While there are many QSRs, they have several things in common. They are known for their fast services and limited menus. They typically offer a drive thru and takeout options with no wait staff. The options on their menu are typically between $1 and $10. We know them as brands like McDonald’s, Wendy’s, and KFC.

QSRs Investment Opportunity

Most of us will never have the desire, time, or funds to operate a fast food restaurant, but they can still be a part of your investment portfolio. Most people are familiar with mutual funds, but there are also funds for Quick Service Restaurants. There are accredited/alternative investment firms that specialize in the QSR space. They tend to build up a portfolio of similar QSRs in an areas. These funds aim to buy and improve individual franchise locations. By replicating what was successful in another location, they become more successful. The more locations that are owned, the less risk of competition, which is another way that these funds often earn more of a profit. For reference, most small “mom and pop” owners don’t have the capital funds to revamp and modernize restaurants, especially as many are increasing digital. Each of us has been to an “older” looking QSR and noticed. QSR funds are able to pool resources from their investors and enhance individual locations.

Quick Service Restaurant funds are also beneficial to current franchise owners who are looking to retire. Most franchisors have rules about selling. Often the franchisor will approve owners who already own their brand of franchise, the more the better, because it shows success within the brand. Selling a franchise to a QSR fund who already owns your brand increases the chance of a sale being approved. This allows QSR funds to buy more at better prices, which is a win for investors.

QSR Funds Might Not Be Right For You

The biggest con to Quick Service Restaurant funds is that they are not liquid. Each fund will have its own rules and terms, but in general they illiquid and there is a risk of losing an entire investment. These funds offer no guarantee of investment or rate of return. For these reasons, if you are considering QSR funds to be part of your alternative investment portfolio they should be a small part of your investable asets.

Owning QSRs is not for everyone. But, they are an alternative investment, away from your traditional stocks and bonds that may be more recession proof.

Frederick Hubler is the founder and CEO of Creative Capital Wealth Management Group, a retainer-based wealth strategy firm specializing in alternative strategies located in Chester County, PA.

Securities offered through Arkadios Capital, LLC (Member FINRA and SIPC).

Past performance does not guarantee or is indicative of future results. This summary of statistics, price, and quotes has been obtained from sources believed to be reliable but is not necessarily complete and cannot be guaranteed. All securities may lose value, may not be insured by any federal agency and are subject to availability and price changes. Market risk is a consideration if sold prior to maturity. Information and opinions herein are for general informational use only and subject to change without notice.