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How has the coronavirus affected ASX fast-food shares?

With more people confined to working from home, fast-food companies that offer the delivery of quick and cheap meals could become a consumer staple.

With that in mind, here’s how two fast-food companies on the ASX have responded to the coronavirus pandemic.

Domino’s Pizza Enterprises Ltd (ASX: DMP)

Domino’s is Australia’s largest pizza chain which also operates stores in New Zealand, Japan, and Europe. Last month, the company reported that same-store sales for the first-half had grown at their fastest rate in 3 years. The company saw same-store sales grow by 4.1% and total sales increase by 10.6% for the half-year.

Domino’s has kept the market updated on its performance and movements throughout the COVID-19 pandemic through a slew of market updates. Most recently, Domino’s closed all its stores in New Zealand for a period of 4 weeks in adherence to the government’s measures.

Despite the major disruptions caused by measures aimed at curbing the COVID-19 pandemic, Domino’s has maintained that the company can play an important role. According to management, the delivery services offered by Domino’s could assist social distancing measures and reduce supermarket crowds.

Domino’s has responded to the pandemic by implementing a range of initiatives across all markets to ensure the safety and wellbeing of its customers and staff. Examples of this include ‘zero-contact’ delivery which involves leaving meals at doorsteps to ensure social distancing is adhered to. In response to a surge in demand for home-delivery, Domino’s is in the process of hiring up to 2,000 team members to keep up.

Collins Foods Ltd (ASX: CKF)

Collins Foods is a restaurant operator best known for running the KFC fast-food chain. The company has closed its dine-in operations and is focusing more on its takeaway, drive-thru and delivery options which account for approximately 80% of overall sales.

The company’s KFC operations are moving to a contactless service and are working to ensure contactless delivery options are available. Customers are also being encouraged to pre-pay through the KFC app and to use contactless payment methods.

According to Collins Foods, the sales performance of KFC operations in Australia has been in line with original expectations. According to management, the alternative delivery channels is expected to minimise the potential impact of the COVID-19 pandemic on sales.

Foolish takeaway

The COVID-19 pandemic has wreaked havoc on cafes, restaurants and bars across Australia. The social measures and precautions imposed by the government have forced many businesses in the hospitality sector to close their doors.

Despite these harsh consequences, fast-food operators like Domino’s and Collins Foods could see a surge in business as consumers seek out alternatives to cooking at home.

On the contrary, it’s important that investors understand that the ongoing pandemic is a fluid situation which could stop all delivery methods. As a result, I think a safe strategy would be to wait for the situation to stabilise before making any drastic investment decisions.

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Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Collins Foods Limited and Domino's Pizza Enterprises Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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