Reinvestment plays a crucial role in the fast-food industry, as emphasized by Jack Cowin, the founder and executive chairman of Competitive Foods Australia. Despite the recent challenges posed by Covid, the fundamentals of the industry have remained unchanged over the past 50 years. Food must be hot, drinks cold, and service with a smile. Cowin has grown Hungry Jack's from a single store in Perth to over 440 stores today, defying the trend of people spending less on eating out. The Australian fast-food and takeaway industry has grown at an annualized rate of 1.3% over the past five years, reaching an estimated $25.3 billion in 2024.

Unlock the Power of Reinvestment in the Fast-Food Business

Reinvestment and the Fast-Food Industry

Reinvestment is the cornerstone of Competitive Foods Australia's success. As Cowin states, "Why we have been successful is because we have had 50 odd years of reinvesting back into the business." The company plows $75 million back into Hungry Jack's each year, ensuring its continuous growth and improvement. This approach has allowed the chain to weather the storms and emerge stronger.In addition to Hungry Jack's, Competitive Foods has also made significant investments overseas. It has invested over $500 million in a portfolio that includes Canadian restaurant group SIR Corp, Kansas City transport provider Railcrew Xpress, and Houston-based construction-safety and maintenance firm Apache Industrial. These investments have diversified the group's interests and enhanced its global presence.

The Impact of Reinvestment on Store Management

The way business is managed has changed due to various factors such as the shift to drive-through and takeaway, rising building costs, and red tape. Store size has shrunk by about 20% on average, but costs have to be passed on to maintain profitability. The real challenge is to get sales up, and Cowin believes that taking care of employees is the key. About 85% of Hungry Jack's stores are company-owned, and store managers can now make as much as $200,000 - $300,000 a year, triple the average salary from a few years ago. By rewarding employees on a profit-share basis, the company has achieved better results.

Reinvestment and Stock Performance

Cowin's recent actions in Australia-listed Domino's Pizza Enterprises also highlight the importance of reinvestment. He has upped his stake in the company and is looking at managing overheads and rethinking the pace of store growth. The stock has tumbled 80% from its all-time high in 2021 due to aggressive expansion and relatively flat sales growth. By focusing on efficiency and reinvestment, Domino's aims to shore up its bottom line.ASX-listed Domino's Pizza Enterprises is the largest pizza chain in Australia by store numbers and network sales. The company is targeting store closures in Japan and France to address its challenges and improve profitability.

Cowin's Bootstrapping Days and Investment Strategy

Cowin's journey began in 1968 when he raised $300,000 from 30 investors and opened his first KFC outlet in Perth. Over the years, he has expanded his business and diversified into other areas. His investment strategy is to make companies bigger and stronger by investing in synergistic opportunities. He has no plans to acquire another fast-food company but instead focuses on growing existing businesses and making strategic investments.At 82 years old, Cowin has no plans to list the company either. He prefers to retain cash on hand to expand and avoid getting into a position where the company can be taken out of the game. "Rule one in business is don't go broke," he says.