Andrew Willis: Local and small-scale restaurants were some of the economic victims of the pandemic. With a dependency on indoor dining and less capital to withstand a downturn in volume and adapt to touch-free and automated customer preferences, they suffered while behemoth fast-food chains continued to grow.
If investors want to make money in the space, sector strategist R.J. Hottovy says for sustained growth, focus on the big fish, that have strong operating income – McDonald’s, for example. McDonald’s may emerge as a leader in post-pandemic fast food. The company’s “Accelerating the Arches” plan is a good example.
First, McDonald’s is moving more of its marketing onto the fast-growing social media space with celebrity promotions. Second, they’ve used their scale to be more aggressive on value offerings for increasingly budget-conscious customers, and lastly, they’ve doubled-down on their drive-thru processing speed with the use of digitized ordering, including predictive and voice-based ordering methods.
Now consider that even before the pandemic, McDonalds was nearly tripling and beating by 10-fold the sales of other giants, Restaurant Brands International and Subway, respectively. With the future-proofing that McDonald’s has done, there’s a good chance that post-pandemic, customers will still be lovin’ it.
For Morningstar, I’m Andrew Willis.
Editor's Note: All images are courtesy of Unsplash.com and AP Images.
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