Last Updated on September 21, 2023 by BFSLTeam BFSLTeam
While investing in the Indian stock markets may be different from visiting a restaurant, there are some investors who find it similar to a culinary adventure. If you think about stocks being compared to food which has various flavours and options, then stocks may be similar with various sectors and industries of company stock to opt for. Apart from this, the stock market has investment options for traders and investors of all types. Often, a kind of stock that falls within the umbrella of QSR stocks is ignored, and these stocks should be explored further. What is “QSR”?
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What are QSR Stocks?
In case your mouth is already watering thinking that QSR stocks are linked to food in some way, you are not wrong. “QSR” stands for Quick Service Restaurant and these stocks refer to those representing fast food companies like McDonalds and Starbucks. QSR companies represent some of the most recognizable and popular fast-food chains, in India and globally. Now that you have the answer to the question, “What is QSR?”, we can read about this further.
QSR – Culinary Investments
Quick-service restaurant operators in India and in other parts of the world have been having tough times in the recent past. Amidst a background of high inflation and a slowdown in spending by consumers, QSR segments may be viewed as some of the least investment-friendly categories of stocks to buy right now. In the recent past, companies representing fast food chains such as Jubilant Foodworks. Devyani International and Sapphire Foods have corrected from their highs. So, what is a QSR restaurant, and is any QSR restaurant doing well?
A QSR restaurant is basically any fast-food chain like Mcdonald’s, Pizza Hut, Starbucks, and the like. You often see fast-food restaurants like KFC, Mcdonald’s, and Domino’s going full at any time of the day! The attraction of quick-service restaurants lies in their appeal to make food preparation quick, give you efficient service, and create affordable options in terms of their menu. So, are they good investments?
Is it worth investing in the QSR landscape?
Most companies in India in the QSR segment have faced moderate profits and revenue due to a slowdown in demand, profitability pressure, and high costs. Analysts, however, believe that stocks in QSR companies could be potentially rewarding in the long run, given that the demand for the restaurant industry is bound to grow at some point. Additionally, India has a thriving young population that loves to use fast food restaurants, and online ordering boosts this trend. Here are some factors to consider in favour of QSR investment:
- Resilience
QSRs are prone to be resilient in economic downturns. Consumers tend to dine out or order from different fast-food chains on a regular basis, as these may be considered affordable options in hard times.
- Expansion
Several QSR chains have a solid global presence and many are on the way to vigorous expansion. In emerging markets, QSRs tend to be on the path of growth and this is a positive sign.
- Famous Brands
QSRs and QSR companies include reputed and trusted brands. This results in customer loyalty and revenue of a recurring nature.
- Franchises
A substantial number of QSRs operate on the model of franchises. This means investment into restaurant chains and inflows of capital and resultant growth.
Some Considerations
Before you consider investing in QSRs, there are certain factors to think about:
- Competitive Industry
The QSR industry is highly competitive and comprises a number of players aiming for market share. You may want to find a company that stands out from the competition to ensure positive prospects.
- Economic Factors
QSRs may display some sensitivity to economic conditions. For instance, during inflationary periods, people may cut back on spending and eating out. QSRs themselves may face price hikes as commodities become costly and raw materials hit all-time high prices.
Challenges
While thinking of any investment, especially in stocks, you may want to consider some potential challenges that the QSR industry faces. With certain regulations in place and some supply chain disruptions, the QSR industry often experiences challenges in its operations. However, in spite of the many obstacles in the path of this industry, it seems to be booming in a country like India in which the population itself has seen a rise in disposable income. QSRs tend to be an affordable option in economies like India with many food chains adapting to the tastes and preferences of the Indian consumer (think McAloo Tiki Burger!!).
Take a Bite Out of QSR Stocks
In the Indian context, fast food is here to stay and you could say that it seems to be growing, although slowly, day by day. With most of the Indian consumer segment vying for tasty options in the food industry and the affordability it brings, QSR stocks may be a good option for potential long-term prospects.
If you want to diversify your portfolio, then you may consider investing in QSR stocks and they may potentially give you moderately consistent returns in the future. You may think that consumers are spending less due to inflation, but inflation results in consumers seeking affordability, and QSRs give you that. You can balance your portfolio with tried and trusted brands in the QSR segments and hold stocks for potential long-term gains.
