Fulham Shore (FULH.L) is a small-cap restaurant owner listed on the AIM market. They have two main brands in Franco Manca and The Real Greek operating predominantly in the UK. Franco Manca is a pizzeria chain focused on providing high-quality sourdough Neapolitan pizzas and The Real Greek serves a variety of modern Greek and Eastern Mediterranean cuisine.

Between these brands, Fulham Shore currently operates 72 sites with plans to open 3 more by summer 2021, taking advantage of the global pandemic lowering rent on commercial highstreet properties. This expansion places them well to benefit from the anticipated surge in demand for restaurant services once pandemic related restrictions are lifted. Given their small-cap stock status, the growth potential is greater than that of comparable larger firms however, the risk is also higher. Even prior to lockdown restrictions Fulham Shore stock value had been steadily declining since late 2017 due to lacklustre revenue performance and they currently have a significant level of debt. Despite this, their stock price has already rallied to last year’s levels and have the potential to grow further.

Another possibly less risky comparable company still with high growth potential would be Restaurant Group (RTN.L). They operate a larger portfolio of restaurants including Chiquito and Wagamamas. Similarly to Fulham Shore, they have a significant level of debt which could be expected in the current climate. However, unlike Fulham, they are yet to rally to pre-pandemic stock prices (approx. 48% growth required to reach 52-week high). 

As a whole, these smaller-cap restaurant operators may not be suitable longer-term investments, given their high levels of debt that may be unsustainable. However, given the strong likelihood of a surge in demand for hospitality services once restrictions are lifted, they could see significant growth over a short period after restaurants are allowed to reopen and may be a lucrative option for prospective investors.