McDonald’s might have been “loving it” since 2003, but Australian investors are rapidly catching on to the opportunities of the fast food industry.  According to fresh data, 304 new Quick Service Restaurant (QSR) locations opened in Australia in 2024 as Guzman y Gomez was floated on the stockmarket last year. The outlook for the fast food sector in Australia is looking tasty.  Burgess Rawson national partner Yosh Mendis says that strong fundamentals are behind the appeal for investors.  “From an investment point of view, it’s probably the strongest asset class in the investment market right now, and certainly from an ownership perspective,” Mendis says.  “People own them and just never sell them.” Investment cravings According to Burgess Rawson, the median sale price for fast food outlets is $4.78 million and the average land rate $7672 a square metre.  Major deals are underscoring the sector ’ rise, including a fast food portfolio of five outlets—the Bayview Centre, Warrawong in NSW—selling for $37.8 million. The deal late last year included $12.8-million for a McDonald’s restaurant, representing a 4.1 per cent yield, reportedly the highest price for a Maccas in Australia. “They’ve got secure income streams, and you can set and forget them,” Mendis says of the assets.  ▲ Burgess Rawson national partner Yosh Mendis. The only problem is breaking into a space where assets are so tightly held.  “Properties that I’ve sold in the fast food space have been owned by the same owners for north of 35 years,” Mendis says.  “They just held it in the family and there are assets out there that have been held for longer than that, for 40-plus years and still haven’t come to market. “There are such strong business fundamentals [in the sector] that their tenants just never leave.” But with hundreds more opening there are opportunities out there for investors and developers alike.  Fundamentals  According to location data platform GapMaps in its fast food report for 2024, the 36 leading QSR brands opened a net 178 locations last year. GapMaps highlighted that despite a 3.5 per cent fall in real per capita spending, Australia’s population growth has supported the fast food explosion.  To keep pace with this growth, it said, major QSR chains such as Subway, McDonald’s and KFC need to open at least 20 net new stores a year to maintain store provisions that sit at around a ratio of one store per 20,000 to 30,000 residents. ▲ Fast food heavyweights are facing increasing competition. “They’re essential services, they’re recession-proof,” Mendis says.  “Because even when things are a bit more challenging, people go for cheaper food alternatives.  “And the fast food options and optionality that these operators offer now is a much higher grade than previously. People often don’t see them as traditional fast food.”  And this is why some of the newer entrants to the market are thriving. Not all fast food is equal But the rising tide of fast food growth has not raised all boats. US chains such as Wendy’s, which left these shores 40 years ago and returned in January with a restaurant on the Gold Coast, have often proven “hit or miss”. Pizza chain Domino’s was one of the rare brands in net negative store openings last year, closing 20 stores and only opened nine, while ASX-listed Collins Foods signalled its intention to exit its Taco Bell business last week.  But the heavyweights remain solidly on the podium. In terms of total stores, Subway is at the top of the food chain with 1246 stores, McDonald’s trailing with 1050, followed by KFC (804), Hungry Jack’s (471) and Red Rooster (321). ▲ Wendy’s, the world’s third largest burger chain, is planning 200 restaurants in Australia by 2034. However, there are up-and-comers that are offering the market something new—and growing fast. Guzman y Gomez, which markets itself as a healthier option, added a net 27 new stores, while Zambrero also opened more than 20 locations.  “Guzman has such a positive growth story,” Mendis says. “The market hadn’t seen a convenient Mexican fast food offering which had drive-thru capabilities and things like that, and Guzman ...  ran with that and took on that market really strongly. “They’re providing a good food menu while also sitting within an attractive price band for a variety of different age groups, and they have a full-day offering which broadens their revenue base because they’re operating almost 24/7.”  ▲ Guzman y Gomez has a market capitalisation of $3.8 billion. Innovation has often been key to fast food success, with operators now using artificial intelligence to improve efficiency and personalise customer experience, as well as data-driven approaches to improve efficiency.  “A lot of those guys have invested heavily in technology, and things like their drive-thru which often makes up a large portion of revenue,” Mendis says. “And now that they’ve got third-party delivery services like Uber Eats and Deliveroo they can really expand that range to a customer base.” This wider customer base with slightly different service demands has caused them to “look more aggressively at those network chains”, he says.  Location remains key But the sector does not come without its challenges. It is an asset class that has specific locational needs.  Huge cost increases and lack of available land are sending rents skywards, which puts the pressure on the operators themselves, especially the fast growers such as GyG. “Tenants are having to pay more rent to ensure these developments stack, to be able to get them out,” Mendis says. “What we’re seeing at a lot of the new projects is that the rents are higher than what we saw say, 12 to 24 months ago, and we’re going to see that continue to increase.”  ▲ Fast food outlets can be sold alongside large format retail assets, such as the Bayside Centre in NSW. And we may start to see a slowdown in new builds as these industry-wide pressures bite.  “Although there are stores opening up fairly frequently, the supply of new product is slowing down because there is not enough land to buy and the cost of construction,” Mendis says. “The time for planning approvals is pushing out the time where these tenants can actually agree terms on the site and actually have the site built and up and running, which is making the sites even rarer for investors.  “And that’s why, when we do go to market these assets, they perform so well, because they just don’t come to the market all that frequently.”