Treasure Chest: Quick Service Restaurants

Array
(
    [0] => Array
        (
            [0] => ((DMP))
            [1] => ((CKF))
            [2] => ((TYR))
        )

    [1] => Array
        (
            [0] => DMP
            [1] => CKF
            [2] => TYR
        )

)

This story features DOMINO'S PIZZA ENTERPRISES LIMITED, and other companies.
For more info SHARE ANALYSIS: DMP
The company is included in ASX200, ASX300 and ALL-ORDS

FNArena's Treasure Chest reports on money making ideas from stockbrokers and other experts. Today's idea is Quick Service Restaurants.

By Mark Woodruff

FNArena’s Treasure Chest reports on money making ideas from stockbrokers and other experts. Today’s idea relates to Quick Service Restaurants.

Whose Idea Is It?

Boston Consulting Group

The subject:

Quick Service Restaurants.

A Boston Consulting Group survey of 2,000 consumers about Australian Quick Service Restaurants (QSR) suggests inflation has driven most of the sector’s recent growth, leaving operators increasingly reliant on taking market share rather than benefiting from category expansion.

While the QSR market has grown by around 5% annually over the past three years, it’s noted volumes have been broadly flat once price and product mix are stripped out.

The consultants assesses the Australian QSR market is not facing structural decline. Rather, the sector is undergoing a transition that is driving one of the most significant shifts in market share seen in recent years.

Consumers made it clear that macroeconomic conditions sustaining this limited level of growth in the sector are deteriorating.

The survey revealed a net 6 percentage points (ppts) of Australians reduced QSR spending over the past six months, rising to 9ppts when consumers were asked about plans for the next six months.

A handful of QSR operators are already executing on market share, but many continue to rely on price increases to support revenue growth, BCG observes.

More info:

Spending pressure is most evident among older Australians.

More than half of Baby Boomers (aged 62 to 80) reduced their QSR spending, while only 14% increased it, resulting in a net spending balance of -37ppts, the weakest outcome of any generation surveyed.

By contrast, Gen Z (aged14-29) was the only cohort to report a positive net spending balance, at more than 17ppts.

Lower-income households earning less than $75,000 annually reported a net spending balance of -22ppts over the past six months, with this expected to deteriorate to -28ppts in the next six months.

Even middle-income households earning $75,000-$200,000 are becoming more cautious. Among consumers cutting back, 70% cited higher prices as the primary reason, while 49% pointed to a desire to build savings and a further 49% reported shrinking savings balances.

In short, BCG concludes restraint is being driven by both precautionary saving behaviour and genuine financial stress.

Noting price accounts for just 36% of perceived value, while service and speed contribute a further 26%, the survey suggests successful operators are differentiating through execution rather than price alone. A further 19% are driven by food quality.

Those gaining share are not necessarily the cheapest, but typically have clearer positioning and more consistent execution.

One in two Australians now use AI at some stage of their QSR purchasing journey, highlighting the growing importance of digital visibility and channel strategy, BCG highlights.

Current AI usage remains largely research-focused, with consumers most commonly using AI to compare prices (17%), research restaurants (17%) and review nutritional information or ingredients (15%).

Fifty percent of Gen Z prefer third-party platforms for delivery and takeaway. Gen Z’s digital ordering penetration is 63%, while Millennials are at 52%.

The consultants suggest QSR operators should treat these platforms as an opportunity for customer acquisition, not as the customer destination.

The survey also highlights the growing negative influence of GLP-1 medications on QSRs. Around 2%-3% of adults currently use such medications, with oral formulations expected from late 2026 likely to broaden adoption.

Among consumers surveyed, 19% reported ordering fewer items or skipping side dishes, while 15% said they were seeking healthier restaurant options.

A further 15% were modifying orders to improve nutritional outcomes, 15% were choosing smaller portions, and 14% reported visiting QSR outlets less frequently overall.

Stockbroker Assessments

Australia’s two largest ASX-listed QSR operators elicit mixed responses from local stockbrokers, with some referring to changing consumer practices, as highlighted by BCG’s survey.

Only two of the seven monitored daily rate Domino’s Pizza ((DMP)) shares a Buy. Four others sit on Neutral/Buy. Morgan Stanley’s Underweight rating equals to Sell elsewhere.

With exception of the latter, all price targets are sitting well above today’s share price.

Expectations, projections and general appraisals for Collins Foods ((CKF)) are a lot more positive, though its shares too are currently trading well below price targets set.

Those seven brokers are currently divided over four Buy-equivalent ratings and three on Neutral/Hold.

See Stock Analysis (on this website) for more details.

Merchant Payment Systems

In addition, it looks like competition is heating up in Australia for payment and back-office services providers to smaller and independent QSR-style operators, including cafes, take-away shops, bakeries, coffee outlets and the like.

Melbourne-based Zeller announced this morning the launch of its own cloud point-of-sale software app with built-in AI, including Zeller AI Assist.

Zeller’s upgraded offering competes with Square, Shopify and Lightspeed, as well as with Tyro Payments ((TYR)) and the banks.

FNArena’s Stock Analysis shows Tyro shares are trading well below price targets and valuations set by local Stockbrokers, but this does not by default translate into Buy ratings.

Morgan Stanley rates the stock as Underweight, while Macquarie sits on the fence with a Neutral rating.

Morgans is currently the sole Buy-rater in the FNArena universe, inspired by the cheap-looking share price.

Find out why FNArena subscribers like the service so much: “Your Feedback (Thank You)” – Warning this story contains unashamedly positive feedback on the service provided.

FNArena is proud about its track record and past achievements: Ten Years On

Click to view our Glossary of Financial Terms