Sir Royalty Income Fund T.SRV.UN

What does the future hold for SIR - could be interesting

[logicandinertia]

Things seem to be progressing well at SIR, as evidenced by traffic, same store figures and increased dividend.  The share price this year has nicely outperformed other interest sensitives and throws in an 8 percent yield.    The corporate owned model means that SIR can ensure consistency and rapidly institute change at all locations, versus the latency inherent in the franchise model.  Renovations have been done on a measured pace, keeping things fresh and the conversion of Fazooli to Scaddabush has been a master stroke.  SIR has been run conservatively, judicially adding restaurants in high traffic areas versus the scattershot franchising model employed by Cara.  So currently, conditions look fine for Sir.  Menu prices have crept up to offset the min wage increase, but traffic seems to have held up.  Given that the royalty gets paid on REVENUE, not corporate profits, the menu price lift isn’t a bad thing.  

The Canadian restaurant industry has been in consolidation mode.  Peter Fowler is around 60/61, so there is likely no immediacy to him wanting an exit plan.  But you never know.  It is safe to say that if Fowler hung out a For Sale sign, there would be no shortage of suitors.  Not that Australia’s Competitve Foods LTD owns about 29 percent, bought in 2015.  They are one of the largest restaurant owners in Australia.  Cara has also been a consolidator , with its latest purchase being Keg.  Would a US restaurant chain want exposure to Canada ?  Possibly.  

Sir’s disciplined expansion strategy has allowed it to remain nimble and focus on a finite number of high traffic locations.  It will ultimately be sold but but as one waits for this eventuality, one collects close to 8 percent.