This Week, Industry Snapshot Looks at
Fast Food Restaurants

Boston Chicken, Inc. Garden Fresh Restaurant Corp. McDonald's Corporation Papa John's International, Inc. Sonic Corporation Wendy's International, Inc. Subscribers Online Discuss Industry Snapshot

ALEXANDRIA, VA (August 29, 1997) -- The following is anabbreviated version of the Motley Fool's "Industry Snapshot," an educational subscription product available for delivery via e-mail or fax. We feel that it is the best tool available for learning how to invest in stocks.

A sample of the full length subscription product is available for download, as well as details surounding its genesis. To the right subscribers and non-subscribers alike are invited to peruse the companies that are featured in this week's Industry Snapshot. In addition, we urge existing subscribers to take advantage of "Subscribers Online," it's chock full of helpful research and follow-up information on the industries and companies featured in previous Snapshots.  

Every week we will offer up a taste of what is available to Industry Snapshot subscribers by providing a short summation of the industry and the companies that appear in the most curent issue.

This Week's Industry Snapshot

Eaten any fast food lately? Most likely you have, and you are certainly not alone. Call it the "Golden Age" of fast food. The "quick service" industry, liberally sprinkled with hamburger joints and pizza delivery places, has risen to the hectic challenge presented by life in the late 1990s by providing speedy eats, friendly service, tasty food, and clean surroundings. More than 50% of all meals eaten out of the home are eaten at fast food places, a development that only first occurred in 1994.

All this growth has not come without problems. The surge in demand for "food on-the-run" has faced labor shortages, stagnant pricing, capacity constraints (in the U.S.), and "concept" saturation, meaning that there are way too many of the same kind of chains. The fast food market and the casual dining segment are overgrown with these "concepts," each vying for a smaller share of the disposable income dollar.

Keeping concepts fresh and current in the customer's eyes is just one of the challenges in the business. This Snapshot essentially cleaves the restaurant industry in half, with "fast food" encompassing all the concepts in which there is no individual menu or table service. Some indexes of restaurant stocks further break down the fast food arena into hamburger concepts, delivery concepts, and "fast-casual" concepts. However, we feel these differences stem more from market focus than from the companies' operating models, so we employ the broader classification.

Thus far this year, a comprehensive index of restaurants tracked by Wheat First Securities was up 14.2%, lagging considerably behind the S&P 500. Hamburger chains, which include three of the companies featured in this Snapshot, are up 25.7% this year, making them the star performers of the restaurant group as a whole. The overall restaurant industry trades at roughly 15x aggregate 1998 earnings estimates, which represents a 22% discount to the overall growth rate of the industry. This is definitely a depressed industry.

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