Fairwood (52 HK) is a Hong Kong fast-food restaurant chain with 172 outlets. It serves a mix of Chinese, Japanese and Western food, catering to the tastes of white-collar workers in Hong Kong.
I believe that Fairwood fills a niche. It caters to those who want low-priced meals but prefer Hong Kong-style fare that’s healthier than a typical McDonald’s meal. Fairwood’s customer reviews tend to be average and in line with larger competitor Café de Coral, which has a similar business model.
Hong Kong’s restaurant industry is growing slowly in the low-single digits. Fast-food restaurants are taking share, however, and Fairwood in particular. The company’s return on equity has been consistently above 20%, and pre-pandemic top-line growth was typically in the high-single digits.
A double-whammy has hit Hong Kong restaurants over the past two years: the 2019 anti-government protests cut off inbound tourism from the mainland. Then came COVID-19, which led to dining-out restrictions and social distancing.
Fairwood dealt with these problems cleverly by rolling out the online ordering platform Click & Collect, which has become a big success. Revenues only fell about 10% or so compared to pre-pandemic levels. However, since takeaway food carries lower margins, Fairwood’s earnings have still dropped quite a bit since the pandemic began.
Dennis Lo has been running Fairwood since 1981. He has won awards as the entrepreneur of the year for the China region in the service category. And he’s undoubtedly a leader of the highest calibre. His son Francis Lo has recently joined top management, and this introduces an uncertainty factor. But Dennis continues to be in charge.
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