The popularity of fast-food assets continues to soar. Over the past two years this segment of the commercial sector has consistently outperformed all others after sales of convenience meals skyrocketed during the pandemic according to national agency Burgess Rawson. Now the agency’s recently released 21/22 financial year results show this trajectory continuing, all 22 fast food assets sold at Burgess Rawson auctions during this time delivering record yields and consistently high capital growth.

Give me more

While lockdowns and social restrictions led to business increasing at many takeaway outlets including smaller franchises and independents, some of the biggest winners have been the top four multi-nationals – McDonalds, Hungry Jacks, KFC and Subway. Impact on revenue for these big four was minimal throughout 2020 and 2021 according to Roy Morgan research, their solid performance attributed to well-established service models of drive-thru sales outlets plus the industry’s more recent additions of digital sales tools both online and instore, and home delivery drivers. This resulted in the four market leaders accounting for over 40% of the fast-food sector’s total revenue in 2021 and further enhanced the coveted investment status of their bricks and mortar stores.

In 2020 though all takeaway outlets saw a hike in business. Whether large or small, fast-food providers benefitted from weeks-long periods of unprecedented lockdowns and social restrictions. Consumers stuck at home, prevented from restaurants and making regular trips to the supermarket, turned to the convenience of pre-made hamburgers, buckets of fried chicken and other ready-made meals like never before Roy Morgan data shows: in 2020, the number of those aged over 14 who ate takeaway from local fast food outlets as well as the likes of McDonalds, KFC, Hungry Jack’s and Domino’s over an average four weeks jumped from 13.3 million (63.7% of the total population) the year before to 15.9 million (75%). In an average four weeks during 2020, 3.7 million Australian’s or 17.6% of the population ate from these outlets 10 times or more.

Growing appetites

The good news for investors in this segment’s assets is that the uptake of fast-food is forecast to head north for years to come. Total revenue in the fast food and takeaway industry is calculated to hit $22 billion in 2022 followed by continued growth. Research from IBIS World has found consumers are continuing to appreciate not just the convenience of being handed or home-delivered a ready-made meal but also healthier menu options and the greater variety on offer from fast food providers.

These changing tastes are driving expansion, growth and attracting newcomers. Locally-owned burger chain Grill’d has grown from one store in Melbourne in 2004 to 155 locations, while Tex Mex fast food franchise Guzman Y Gomez has ballooned to 148 outlets after opening in Sydney in 2006.

Branching out

Newcomers on the fast-food scene are tending to prove popular too, while other established takeaway and fast-food outlets such as Roll’d Vietnamese have been successful enough to warrant making their ready-made meals available in supermarkets.

Among more recent brands to Australia is iconic American burger chain In-N-Out which recently resumed its pop-up store concept in Sydney’s Darlinghurst and another in Perth. Pre-covid the US burger chain had hosted several pop-up stores around Sydney.

Even a new kid’s home delivery service has entered the fray: Australian company Go! Kidz is a recently-launched national meal delivery service designed to cater to the fussiest of children without sacrificing nutrition or flavour for a reasonable price.

Positive signs

Burgess Rawson reports that this year’s sales have shown sustained yield compression as existing landlords hold on rather than divest fast-food assets while aiming to add more. Motivating them are the many boxes the segment ticks, agents say, such as:

  • Long term leases – often a 10-year initial term with options extending another 10 or 30 years – plus reputable global brands or growing local brands as tenants
  • Range of price points to suit investors big and small, starting from around $500,000
  • Increasing use of sales tech such as self-serve, apps and online orders
  • Matching consumer demand with healthier menu items
  • Being a true ‘set and forget investment’ thanks to minimal involvement with experienced-operator tenants as well as the nature of leases

Burgess Rawson has six fast food assets for sale either by expressions of interest or at its upcoming August auctions held across Sydney, Melbourne and Brisbane. Among them is one of the largest and best-known service centres in NSW, the landmark complex at Port Macquarie on the Oxley Highway. The corner 43,600 sqm site holds a BP service station aside a KFC, McDonald’s, Guzman Y Gomez, Oliver’s health food store and an EV charging station Chargefox and offers a total net income of just over $1.7 million.