Motley Fool Australia

Australia’s Top Ten fast food franchises

New research shows McDonald’s is still the most popular takeaway food outlet, despite having 480 stores less than Subway.

A Roy Morgan Research survey suggests more than half (55%) of the population visited at least one fast food restaurant in an average four-week period. On average, three out of every ten (29.5%) Australians visit McDonalds, well above any other competitors.

McDonalds was followed by KFC with 19.9%, Subway with 17%, Hungry Jack’s with 13.1% and Domino’s Pizza coming in at number five with 9.2%. That was followed by Red Rooster (7.7%) and Pizza Hut (4.7%) – both once dominant franchises – are losing market share and shrinking the number of stores.

Nando’s is the fastest growing chain with 4.1% share, and now has 270 outlets around the country, up 285% in the last ten years. Eagle Boys Pizza and Oporto come in ninth and tenth respectively with 2.8% market share each.

By store numbers, Subway is leaps and bounds ahead of the rest with 1,400 outlets, followed by McDonalds with 923, KFC with 617 and Domino’s with 528.

As Warren Reid, Group Account Manager at Roy Morgan Research said, “The supremacy of McDonald’s in terms of total customers and average visitation rate isn’t especially surprising. Not only is its menu is extremely affordable, but many of its 900-plus Australian restaurants offer drive-through, extended opening hours, and/or playgrounds for the kids. In today’s time-poor society, such ease and convenience is a real drawcard.”

As an investor, there are a number of players that you can invest in to take advantage of the rising fast food trend.

Domino’s Pizza Enterprises Ltd. (ASX: DMP) operates 610 stores across Australia and New Zealand, and has recently expanded further into Japan. Domino’s also operates 393 stores in Europe, 12% of them being corporate stores and the rest franchised. However, at the current price of $19.54, Domino’s is trading on a prospective P/E ratio of over 30 times, suggesting much of the growth is already baked in.

Collins Foods Ltd (ASX: CKF) operates 125 KFC Outlets, and across Australia 26 Sizzler restaurants, and has recently expanded into Western Australia and the Northern Territory through an acquisition. Collins also has exposure to Asia with 60 franchised Sizzler restaurants. Currently trading on an historical P/E ratio of 11.2 and paying a dividend of over 5%, Collins may be worthy of adding to your watchlist.

Retail Food Group Limited (ASX: RFG) owns Pizza Capers and Crust Gourmet Pizza franchises, as well as Brumby’s bakery, bb’s café, Michel’s Patisserie among others. Retail Food Group has more stores than Subway across its 8 brands, and says its Australia’s largest gourmet pizza group, making more than 10 million pizzas annually. Trading on a forecast P/E ratio of 14.1 and paying a fully franked dividend yield of 5%, Retail Food Group looks attractive.

Foolish takeaway

Fast food is here to stay, and as the population grows, so too will the number of takeaway stores. The companies above offer a way to play that theme.

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Returns as of 27th November

Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

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