Data shows fast food investment is here to stay

Unprecedented growth. That’s what Australia’s fast food industry is seeing these days, cementing its place as a key destination for many investors’ capital in the commercial property game.

According to IBISWorld, the sector expanded by 2.9 per cent in 2023, with over 30,000 outlets now operating across the country. Fast food revenue continues to climb at an average annual rate of 2.1 per cent, reaching a massive $23.2 billion in 2023. These are exciting numbers for commercial property investors.

The demand for fast food in Australia is undeniably robust, with one outlet for every 880 people, proving the population’s appetite for wallet and clock-friendly dining options. With brands like McDonald’s and KFC leading the charge and growth players like Guzman y Gomez entering the scene, investors are eyeing the fast food retail sector as a resilient and lucrative asset class.

Why fast food can be a reliable investment

Interest rates and global economic uncertainty have both risen since 2022. But fast food assets remain highly sought after, offering impressive returns despite the challenging climates of recent years.

Here’s why investors find fast food an attractive investment:

• Prime locations: Fast food brands strategically position their outlets in high-traffic areas, such as major arterial roads and shopping centres. These prime locations offer great visibility and consistent foot traffic.
• Long-term leases: Fast food outlets typically operate under lease terms that even commercial property landlords will find astonishingly long, with some brands wishing to set up shop for twenty years or more before considering relocation. For investors chasing passive income, this is a huge motivator for adding fast food retail to their property portfolio.
• Brand resilience: The fast food industry is driven by well-established brands, backed by national and multinational parent companies, with strong track records and global recognition. Even during times of economic downturn, fast food typically performs well thanks to its affordability and convenience.
• Tenant security: Fast food outlets aren’t afraid to upgrade their premises, from fit-outs to increasing the verge appeal and visibility. That’s a long-term commitment and gives comfort to landlords of ongoing tenant security.

KFC: The fast food powerhouse

KFC—with nearly 800 stores across Australia and over 24,000 globally—continues to be a powerhouse in the fast food game. Time and time again, the brand has adapted to changing market conditions, fuelling its success and making it a major player for investors to watch.

What makes KFC a brilliant tenant: 

• New store formats: KFC is leading the way with innovative new formats such as drive-thru-only stores, which cater to high-demand areas with limited space. These stores, which typically sit on smaller plots, cost less to operate while keeping service efficiency high.
• Growth: KFC has added 35 new Australian stores in 2023 and shows no signs of slowing. With a focus on expanding its presence across both metro and regional precincts, landlords can expect a steady pipeline of new investment opportunities should they have the luxury of building an ongoing relationship with the fast food giant.
• Sustainability: KFC has also embraced sustainability by reducing its environmental footprint through eco-friendly packaging and energy-efficient operations. As its customers become more environmentally conscious, KFC’s focus on greener operations only helps its brand appeal.

This forward-thinking brand is doing everything right to ensure its continued success many years to come.

Guzman y Gomez: Casual dining’s rising star

While KFC continues to dominate the fast food landscape, Guzman y Gomez (GYG) has become a formidable player in the fast-casual dining sector.

Specialising in Mexican cuisine, GYG has quickly gained a loyal following with its superb dining offerings and commitment to quality.

Here’s why GYG makes a fantastic occupant for fast food assets:

• Rapid expansion: GYG has set its sights on opening 1,000 stores in Australia within the next two decades. Backed by the brand’s recent ASX float, which saw its market value soar to over $3 billion, GYG is positioned for explosive growth.
• Strong performance: GYG reported a 31 per cent increase in sales in the first half of FY24—a clear indication of the brand’s growing popularity.
• Innovative store formats: Much like KFC, GYG is innovating with smaller footprint stores and drive-thru models. These formats not only cater to the growing demand for convenience but also allow the brand to optimise its already efficient operation.
• Successful ASX entrance: GYG’s recent IPO was the hottest on the ASX in three years, with shares closing 36 per cent above their initial price. This financial milestone demonstrates the brand’s strong market positioning and investor confidence.

No one can deny GYG’s credibility as an established fast food brand. But its their potential for incredible growth that makes them such an exciting brand to keep an eye on.

What’s in store for fast food in Australia?

The fast food retail sector in Australia is poised for continued growth, with Euromonitor forecasting a 32 per cent increase in the quick service market over the next five years.

There’s plenty of evidence to support this:

Technological advancements

Unsurprisingly, fast food brands are leveraging technology to enhance customer experiences.

From sophisticated mobile apps to AI-driven ordering systems, tech has helped streamline operations and boost customer satisfaction in the modern world.

Healthier menus

As consumer preferences shift towards healthier options, fast food brands are adding plant-based items, locally sourced ingredients and more nutritious offerings to their menus. This trend will broaden their customer bases, encouraging the more health-conscious demographic to consider the convenience and affordability of fast food.

Sustainability initiatives

By reducing waste, minimising energy consumption and embracing eco-friendly packaging, these brands are also appealing to environmentally conscious consumers. And for investors, sustainability initiatives enhance the long-term viability of fast food outlets as tenants.

Should you consider adding a fast food asset to your property portfolio?

Australia’s fast food sector is not just surviving—it’s thriving. Household names like KFC continue to innovate and expand, and alongside rising stars like Guzman y Gomez, the industry is showing no sign of slowdown.

While no guarantee of future performance, it’s hard to ignore the serious growth the sector has seen in recent years—especially in the wake of a pandemic, which only proves that the asset class is incredibly resilient in times of economic and retail uncertainty.

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Does a fast food asset belong in your property portfolio? We’ve given you plenty to consider why it might. As more investors discover the security and reliability of fast food, those who act quickly to secure a well-located premises with a high-quality tenant will likely relish their decision for years to come.