Quick Service Restaurants (QSR) are all around us. Toasttab reports that 37% of US adults consume fast food every day. According to IBIS World, the market size in 2022 has grown to more than 362 billion. His QSRs like Chipotle have seen their digital sales increase by more than 216% due in part to the pandemic. As the industry changes, business models will have to change as well, which creates interesting opportunities for investors.
SAN FRANCISCO – FEBRUARY 9: A sign stands outside a McDonald's restaurant on February 9, 2009. … [+]
Let's look at the numbers
CNN reports that approximately 84.8 million Americans consume fast food every day. From 2017 to 2022, QSR's market share increased by 3%. Additionally, quick service restaurants account for 50% of the restaurant sector's sales.
Most of us know them as fast food restaurants, but the industry calls them quick service restaurants or QSR. Although there are many QSRs, they all have a few things in common. Known for fast service and limited menu. We typically offer drive-thru and take-out options without wait staff. Menu options typically cost between $1 and $10. We know them as brands like McDonald's, Wendy's, and KFC.
QSR investment opportunities
NILES, IL – APRIL 30: People standing at the counter inside a McDonald's fast food restaurant. … [+]
Most of us don't have the desire, time, or money to run a fast food restaurant, but it can still be part of your investment portfolio. Most people are familiar with mutual funds, but there are also funds for quick-service restaurants. There are certified/alternative investment firms that specialize in the QSR space. They tend to build a portfolio of similar his QSRs in a given region. These funds aim to acquire and improve individual franchise stores. You become even more successful by replicating your successes elsewhere. The more locations you own, the less risk there is of competition, and this is another way these funds make more money. FYI, most small “mom and pop” owners don't have the capital funds to renovate and modernize their restaurants, especially as many restaurants are going digital. We've all been to a QSR that looks “old” and noticed. QSR funds can pool resources from investors and strengthen individual locations.
Quick service restaurant funds can also be beneficial to current franchise owners who are considering retirement. Most franchisors have rules regarding sales. Franchisors often approve owners who already own the franchise brand. The more you approve, the better because it shows your success within your brand. Selling your franchise to his QSR fund, who already owns your brand, increases your chances of getting the sale approved. This allows QSR funds to buy more products at better prices, which is a win-win for investors.
The two-story Taco Bell Defy in Brooklyn Park, Minn. … [+]
QSR funds may not be right for you
The biggest drawback of quick-service restaurant funds is their lack of liquidity. Each fund has its own rules and conditions, but they are generally illiquid and carry the risk of losing your entire investment. These funds do not guarantee any investment or rate of return. For these reasons, if you are considering QSR funds as part of your alternative investment portfolio, they should be a small part of your investable assets.
Owning a QSR is not for everyone. But these are alternative investments to traditional stocks and bonds that can be 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, Pennsylvania.
Securities offered through Arkadios Capital, LLC (member FINRA and SIPC).
Past performance is not a guarantee or indicative of future results. This summary of statistics, prices and quotes has been obtained from sources believed to be reliable, but is not necessarily complete and cannot be guaranteed. All securities are subject to loss of value, may not be guaranteed by any federal government agency, and are subject to change in availability and price. Market risk is considered when selling before maturity. The information and opinions expressed herein are for general information purposes only and are subject to change without notice.
