Fast food becomes main course for investors

Hungry investors are gobbling up fast food assets as soon as they hit the market in Australia.

Burgess Rawson’s new Fast Food Property Investment Report reveals a growing appetite for the popular asset class with demand outstripping supply across the nation.

Properties housing well-known brands such as Hungry Jacks, KFC, McDonalds and Red Rooster remain the most popular on the menu.

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But there is an emerging taste for new players and healthier outlets, such as Oliver’s, Zambrero, Guzman y Gomez and Taco Bell, according to the report.

And the demand for fast food assets shows no sign of slowing, with yields compressing to 4.92% in 2017/18, down from an average of 7% in 2012.

Fast food outlets continue to be highly sought after.

Burgess Rawson director Simon Staddon says the sector is a perfect option for investors looking to upsize their portfolios with little effort or risk.

“These highly-sought after assets have a low risk profile with an upside and continue to grow in popularity, particularly with investors who own self-managed super funds,’’ Staddon says.

“They offer long-term indexed income streams, underpinned by strong land values.

“Demand continues to increase for these tightly held ‘set and forget’ assets, with many landlords holding multiple properties.”

Burgess Rawson auction clearance rates for fast food outlets are among the highest of all commercial property assets – averaging more than 90%.

Honan Partners Chartered Accountants founder Neil Honan says the strong results are not surprising, with fast food assets being “recession proof” and presenting excellent value, with most on long leases.

The long leases of fast food operators are attractive to investors.

“Three of the biggest global brands — McDonalds, KFC and Hungry Jacks (part of Burger King) continue to invest heavily in expansion plans, they have strong lease covenants and the structure of leases is often 10 years with the option to extend by 10 years to offer tenure security,’’ he says.

Digital technology has been flagged as another factor behind investor interest with restaurants that adopt services such as Uber Eats seeing a significant rise in sales and customer reach.

Geographical location is also proving to be less of a concern among primary investors compared to previous years.

A recent sale of a Guzman Y Gomez outlet in Coffs Harbour in regional New South Wales offered a 4.50% yield — matching rates in some Metropolitan areas.

Burgess Rawson Ingrid Filmer is backing continued investment in well-known global players Hungry Jacks, KFC, McDonalds and Red Rooster.

However, she says there is movement in the healthy end of the sector with younger generations going green and supporting environmental initiatives.