When I was a child in rural Arkansas, I remember being in the car with my parents when we passed a McDonald’s (NYSE:MCD) outlet. McDonald’s was founded in California in 1940, but it took quite awhile for McDonald’s stores to arrive in Arkansas.
The first such restaurant in Arkansas must have been in Little Rock, the capital city, and from there they slowly spread outward, as they have in most states. Today, there are more than 35,000 McDonald’s locations worldwide. It wasn’t doing too badly when we passed by what was then the only McDonald’s location in Little Rock, either. It was a destination, a rare and special treat.
I remember my father remarking that he wished he had been in on the ground floor of McDonald’s. I didn’t really think much of it at the time because he wished, like most men of his generation, that he had stumbled into wealth as a younger man. It was like when one would say he wished he had been born a Rockefeller or a Ford. But he would have been much too young to get in on McDonald's ground floor; besides, he said that about a lot of things. He said the same thing whenever we passed by a Kentucky Fried Chicken (NYSE:YUM) or a Burger King (BKW), both of which were relatively rare in those days, too.
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Those eateries started modestly and grew to become first-generation fast-food franchise powerhouses. Perhaps a modest beginning is the key – that and a reservoir of patience on the part of the investor – to discovering the next generation of fast-food success. The problem is that there are so many options.
There are always new places opening and closing. Picking the best bet for success, with so many established restaurants dotting the landscape, can be a gamble.
But I think I’ve found a pretty good prospect – American Roadside Burgers of Smithtown, N.J. It offers the elements that seem to be necessary to meet most Americans’ expectations for a burger chain – it provides traditional food with some accessible (i.e., not too exotic) variations and side dishes supported by what appears to be a sound financial backer.
Presently, it has five locations – in New York and the Carolinas.
The restaurant chain is owned by Chanticleer Holdings Inc (NASDAQ:HOTR), the same company that owns Hooter’s. The food is traditional – it even has a Route 66-sounding name along with a burger on the menu that is actually called the Route 66 – and it offers some intriguing sides like sweet potato fries – as well as the usuals, like french fries and onion rings. Chanticleer has a P/S ratio of 0.7 and a P/B ratio of 0.9.