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Long lineups as global fast food giants reopen

A craving for the familiar has been good for McDonald's, KFC and Tim Hortons, as drive thrus have reopened worldwide.

At the end of April, when Burger King reopened its first English location in Hampshire, the lineup started early and snaked through the town until closing. Locals complained about the traffic jam.

The same thing happened outside of Paris, when McDonald’s (NYSE: MCD) reopened a drive thru.  In New Zealand, as Kentucky Fried Chicken (NYSE: YUM) reopened, some stores ran out of food.

Meanwhile in Shanghai, tickets for the reopening of the Walt Disney Co. (NYSE: DIS) theme park were sold out within minutes of being made available online.

Some of this was pent-up demand after several months with limited movement and social interaction. But it also shows how much we crave the comfort of normal routines and familiar products, which is one of the powerful attractions of multinational brands. They are a reassuring purchase, whether it’s a Big Mac and fries, or a photo with Mickey Mouse.

This is one reason why global brands offers investors a good proposition going forward. There is no roadmap for what lies ahead. While there is plenty of opinion, the current set of circumstances have never been experienced. Therefore, all attempts at past comparisons and the search for historical context are futile.  Whether the economy will rebound with a U, a W, or an elongated L is anyone’s guess.

mcdonalds Hanoi vietnam nuggets
The universal language of McDonald’s: Advertising Chicken McNuggets  in Hanoi, Vietnam. Credit: Ben Mayers

Global brands appeal in any language and culture and their stocks can act as a portfolio anchor – much like the cornerstone stocks offered by Gordon Pape in recent editions. The products dominate in their markets. The company name is the brand, whether it’s Coca-Cola, Nike, Apple, Amazon, Google, or Samsung.

Other advantages include deep pockets with cash reserves, strong balance sheets, and the ability to withstand shocks. These strengths give the companies time to adapt to changing conditions, which they must do to maintain their dominance. Most will pay dividends along the way.

Shanghai Disneyland reopened in early May and has adapted to the current climate with new rules. Everyone is wearing masks. Visitors undergo a temperature screening at the entrance and maintain distance while waiting in line. There are hand sanitizer stations at restaurants and stores. The site is limited to 30% capacity. Photo ops are available if the Disney characters are wearing a full costume, because underneath they can wear protective masks and clothing.

McDonald’s CEO Chris Kempczinski alluded to his chain’s brand power during a recent call with analysts. He noted that after a prolonged shutdown in China “customers are craving comfort” with familiar brands and routines. Fast food offers that, at a friendly price point, he said.

McDonald’s Australia fries

Plenty of challenges lie ahead, but on the plus side, the three fast food brands have rallied from their March lows, as has Disney. McDonald’s has performed best and Yum (Kentucky Fried Chicken, Taco Bell, Popeye’s) the worst. Their dividends appear safe, while Disney has suspended its dividend for now to conserve cash.

Are the stocks bargains? They are a lot cheaper than they were in early March, but not necessarily in terms of the short-term outlook. But the fast food stocks offer a long-term opportunity.

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