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To: Tomato who wrote (5363)	11/30/1998 9:03:00 AM
From: James Clarke	Respond to of 78576

Restaurant stocks generally have a low ROE, because even the most creative concept can be copied easily. Lynch's technique of buying a restaurant concept which is just rolling out across the country could have gotten you in a world of trouble in the last couple years. Because as Boston Chicken, Planet Hollywood and the steakhouse chains have found out, others copy your concept, and may even build it right next door to your property. I do like McDonalds because it has stood the test of time and the test of competition. Another one that looks like a franchise, Starbucks, I am wary of for reasons I think we discussed on this thread before. JJC

To: Tomato who wrote (5363)	11/30/1998 9:48:00 PM
From: Shane M	Respond to of 78576

Tomato, One thing that I've grown to realize about restaurant stocks is that many are captive to their own share price for growth. They don't generate enough cash to expand rapidly as many like to do, so they are dependent on dilutive stock offerings or alot of debt to come up with the cash with which to grow. If the stock isn't highly priced, well, it's difficult to raise capital through the equity markets. This forces companies to debt for expansion, and it's difficult to justify taking on debt if your ROE is 9% or so. So really, the best means of expansion seems to be in achieving an inflated stock price and issuing more shares of stock at an inflated price. For this reason I've backed away from an earlier restaurant stock that I liked at this time last year (RDHS), and avoided (thankfully) another that I was somewhat interested in (STAR). Shane