Fast food buy is a quick profit for Archer Capital

EVEN before the ink has dried on the papers to acquire the company behind Red Rooster, Oporto and Chicken Treat for $450 million, Archer Capital is working out a strategy to sell the asset three to five years down the road -- at a decent profit.

Like most private equity players, Archer likes to buy and sell assets within a three- to five-year timeframe, Archer partner Peter Gold says.

Quadrant Private Equity and other minority shareholders sold Quick Service Restaurant Holdings, operator of 620 fast-fast restaurants, earlier this week.

Archer has been particularly acquisitive in the past couple of months, spending close to $1 billion to snare a diverse portfolio.

Last week, it beat Quadrant to buy Healthe Care, the country's third-biggest hospital group, from Champ Ventures, for $240m. Last month Archer bought Australia's V8 Supercars championship for $300m.

Archer has also been a seller. Four years after buying wine distributor Cellarmasters from Foster's, it sold Cellarmasters to supermarket giant Woolworths for more than $340m.

Gold sees plenty of room for growth in the fast-food restaurant market.

"The industry has experienced robust growth in the past few years and there is plenty more room for growth," he says. He names McDonald's, KFC and Hungry Jacks as the main rivals.

Catriona Noble, chief executive of McDonald's, is "not too concerned" about Archer's purchase of QSRH. "It is a very competitive marketplace and I'm not surprised ownership has gone from one private equity to another," she said.

She is focused on making Mcdonald's 839 outlets, including 600 stand-alone cafes, the best value for customers.

"We have a wider range of menus, 24/7. We offer a breakfast menu and have better facilities with good seating, drive-through and more car parking than any other fast-food chain.

"In today's environment, we have to work hard for every dollar and stay competitive. We cannot afford to stand still.

"We have doubled our chicken business in the last three years and now offer a wide range of premium chicken burgers."

McDonald's turned over sales of more than $3.6bn last year and has almost 20 per cent of the $16.6bn fast-food market.

Independent research house IBISWorld analyst Edward Butler said: "The fast-food industry boomed during the global financial crisis as families scaled down from eating at restaurants to fast-food cafes.

"In 2009-10, the industry grew by 13.7 per cent. Today we expect a steady growth of about 3.6 per cent a year, which makes the industry an attractive asset."

IBISWorld has forecast the fast-food industry will grow to $19bn by 2015-16 and, as the industry matures, there will be greater consolidation among the smaller players.

Concerns about healthy eating have prompted more fast-food chains to widen their choice, cutting back on salt and offering more salads.

"We just have to stay ahead of the game. Bring on the competition," Noble says.