Investors who buy stock in fast food and casual dining chains have the potential to make a great deal of money. After all, Americans spend a lot of money each year eating out. According to the National Restaurant Association, the restaurant industry brings in $1.5 billion on a typical day in 2008.  

But in order to get a share of the wealth in this industry, would-be investors need to understand how it works. In this article, we'll serve up some of things investors must consider before putting their money on the table.

A Distinct/Unique Concept
The best advice is to think like a consumer. When you go out for a meal consider what piques your interest and what is likely appeal to the masses. For example, ambiance might play a role. So might location, décor, menu offerings, price, the amount of service staff on hand and the general theme of the establishment. Look for something that stands out and that you think has growth potential.

Think about how you perceive the establishment and how you think others might perceive it. And remember that a unique concept - or one that has a unique feel to it - will, in many cases, have the best chance of drawing in foot traffic.

Take the Cheesecake Factory (Nasdaq:CAKE), for example. It has often been listed as  "best of breed" stock since its 1992 IPO. Between 1998 and 2003, the stock tripled in value. This could be based on its 200-item menu, which most other restaurants were unable to top, its ambiance and, of course, the dessert menu. Keep in mind that consumers eventually grow tired of what were once "hot" concepts, but if you get into a unique restaurant stock at the right time, you could be in for a tasty return.

Look for Companies that are Well Financed
The restaurant industry can be a fairly capital intensive business. In other words, a large sum of money is often needed to acquire land or large leases, and to erect a viable location. To that end, investors should try to only seek out companies that are well funded or that have access to capital.

The first step is to take a look at the balance sheet, specifically the company's total cash position. Is it large enough to build out many new locations or to expand at the rate management is suggesting? The cost of every restaurant chain location is different, so you'll have to answer that based on the situation you are analyzing. Common sense dictates that if the company in question is losing money and has little cash on its balance sheet, it probably isn't in expansion mode.

Another place to check is the cash flow statement and cash flow from operating activities. Is that number higher than the last quarter and larger than the comparable period last year, or is it negative? The company's ability to generate dollars from its business will help determine its ability to fund growth. (For more insight, read The Essentials Of Cash Flow and Analyze Cash Flow The Easy Way.)

Also, check out the footnotes and the management discussion and analysis (MD&A) section of the quarterly and annual filings. Here, management may detail its plans to raise cash (through the issuance of new shares or debt). It may also talk about its general access to capital and/or revolving credit lines.