The economy might still be in the tank in the United States, with consumer discretionary spending down, and the global economy may still be slumping along displaying tepid growth, if any, but the old saying goes, “People still have to eat.”
With that in mind, many of the staples in the US restaurant business are taking their game overseas into markets still booming for new brands. Here’s a few names that you might recognize, and some you might not, that are out to repeat domestic success in high-growth international markets:
McDonald’s (NYSE: MCD) may be the recognized leader of US restaurant brand growth overseas, with golden arches appearing in 119 countries around the globe with locations just about right on top of famous historic sites such as the Pantheon in Rome and The Great Pyramids in Egypt. In Europe, as well, McDonald’s has made such and inroads over the past couple of decades that the street corners in every major city – and many not so major – resemble those in the United States that are surrounded by the fast food restaurant chains of your choice; namely McDonald’s.
The slow economy has the consumer looking for cheaper food alternatives, and this, as the world’s leading preferable choice for discounted dining, plays right into the hands of McDonald’s playbook.
Even as international growth picks up, however, the company is reporting solid earnings domestically, too, as evidenced by the latest report . MCD continues to satisfy investors and stomachs alike, even in the volatile world that we live in.
With that said, the company is still growing.
Leading the charge of McDonald’s growth in Latin America is Arcos Dorados Holdings (NYSE: ARCO). The company owns and operates a growing number of McDonald’s franchises in Latin America and is expected to realize some very significant double digit growth over the better part of the next decade as the company expands its franchise presence.
Having fallen significantly from its IPO price, ARCO is attracting headlines and investor attention as a candidate to rebound as an international growth story. With the McDonald’s name and success behind it, it’s easy to understand why investors are going positive on Arco Dorados.
Darden Restaurants (NYSE: DRI) is already the world’s largest full service restaurant company, but it is another one that is following the mantra of gunning for international growth. Just a couple of months ago Darden announced that it had entered into a formal agreement with CMR SAB de CV (BMV:CMRB) to bring its popular American restaurant brands to Mexico.
Of the move into foreign markets, and Mexico specifically, Darden senior vice president of Business Development, Kim Lopdrup, noted that, “As we’ve stated previously, Darden remains committed to owning and operating its restaurants domestically. However we believe the best way for us to expand the reach of our portfolio internationally is by selecting the right partners, like CMR, with outstanding operations experience, local market knowledge, and the commitment to delivering our brands’ experience with excellence.”
Darden’s Red Lobster, Olive Garden and The Capital Grille brands, which join P.F. Chang’s China Bistro Inc. (Nasdaq: PFCB) as another American player moving into the Mexican market, will all be making the move south of the border with over thirty locations expected to opened over the next decade.
The move south builds on the momentum started in the Middle East this summer where the grand opening of a Red Lobster in Dubai was celebrated. Look for continued Middle Eastern growth from Darden as part of its international strategy.
Another hugely popular American restaurant brand that has seen its international presence increase is Hooters. Chanticleer Holdings (OTC BB: CCLR), along with a group of its investor partners, landed the Hooters name when the Brooks estate put it up for sale, thanks to a first right of refusal that had previously been granted Chanticleer CEO Mike Pruitt by the late Robert Brooks.
Since acquiring the Hooters name, Chanticleer has set the course for international growth. A fourth Hooters restaurant was opened earlier this year in South Africa, with plans to further expand into Australia also announced. With the Hooters name now in its arsenal, look for Chanticleer to continue growing the brand internationally as other high-growth areas are targeted.
One benefit attached to an investment in CCLR is that few are probably aware that this small company has rights to the Hooters name.
How’s that for a trivia question while digging some Hooters hot wings?
The grand-daddy of all international growth stories right now, however, might be Yum Brands (NYSE: YUM).
Yum, who has such names as KFC, Pizza Hut and Taco Bell in its repertoire, has put a huge emphasis on international growth recently, and the efforts have paid off quickly. The company raked in $589 million in operating profits in 2010 from its operations outside of the US and China, and opened 884 new restaurant openings in over 75 countries that year, with roughly the same number expected for the current year.
Including a continued push into existing international markets, Yum plans to further its presence in the Middle Eastern and Indian markets, with other high-growth areas around the globe also being targeted.
What each of the above stories tells us is that even if the US economy remains sluggish, and the casual diner decides to stay home, there is room to realize growth as the international market continues to expand.
And again, at the end of the day, people have to eat.
Keep an eye on these stocks and stories.
Disclosure: Long MCD, YUM, CCLR.