Fast-food businesses have great growth potential as profits can be reinvested to open new stores and successful formulas tend to work wherever they go. The legendary McDonald’s Corporation (NYSE: MCD) a prime example. Demand for fast-food also tends to be more insulated against tough federal budgets and consumer belt tightening, indeed excess demand can lead to some more literal consumer belt widening.
One recent success story is Domino’s Pizza Enterprises Ltd (ASX: DMP), with the demand for cheap pizza unlikely to be affected by federal budgets or the like, Domino’s remains a good long-term bet. The pizza business has successfully transitioned into the mega-market of Japan and trades on around 32 times projected earnings for 2015. Total shareholder returns have been spectacular and with strong growth forecast it remains a tasty proposition.
If you’re worried you missed the boat on Domino’s you should consider Collins Foods Ltd (ASX: CKF). It operates 168 Kentucky Fried Chicken and 26 Sizzler restaurants around Australia. It’s also growing its Sizzler franchise business in Asia and the Snag Stand restaurants at home. After recording flat revenues and profits in the most recent half year it sells for just 10.5 times projected earnings on an attractive 4.8% yield. The KFC business continues to show revenue growth though, and if the business delivers on its plans to improve margins, it could be at bargain prices under $2.
Much of the fuel to drive the above businesses comes from Coca-Cola Amatil Ltd (ASX: CCL). It too may be offering up cheap prices after a profit downgrade it blamed on weak consumer confidence. A change of management has also come about and the business is now reviewing fixed costs, pricing, and strategy generally. If the penny drops it could be cheap at the current price of $9.12.
Another business to consider is Retail Food Group Ltd (ASX: RFG), with interests in pizza, cake, coffee and donuts through outlets like Crust Gourmet Pizza, Pizza Capers, Brumby’s Bakery, The Coffee Guy and Michel’s Patisserie it has plenty of potential. Growth can come organically or through acquisition and trading on 16 times projected earnings with an attractive 4.8% fully franked yield it looks an enticing buy under $4.30. It’s not the only attractive company out there though, in fact this one has delivered…