Restaurant Reinvention

A year has passed since the pandemic began, and it is abundantly clear that restaurant chains, at least the ones tracked by the public markets, have positioned themselves to benefit and thrive in our future post pandemic and “new normal” world.

There a number of reasons: stimulus checks, pent-up demand and reduced competition from restaurants that permanently closed. Add to this the optimism that takeout and delivery business, in which most of the casual dining chains largely didn’t participate before, now have long term residual traction to add revenue stream.

There are some noted headwinds in which be aware though. Namely, higher labor costs, higher cost of goods from inflation and any potential fallout from the new lockdowns in Europe.

As a result of this more positive outlook, the stock market appears to be anticipating a strong recovery for these casual dining restaurants, ironically at the expense of those QSR chains that outperformed past year.

Stocks like Domino’s (DPZ), McDonald’s (MCD), Chipotle (CMG), Starbucks (SBUX) and YUM! (YUM), quickly rebounded in 2020 as they were already well positioned to survive in a pandemic world with existing technology for take-out, delivery and drive-thru.

Now it’s causal dining’s turn.

Stocks such as Red Robin (RRGB), Cheesecake Factory (CAKE), Dave & Buster’s (PLAY), Dine Equity – IHOP & Applebee’s, etc. (DIN), Bloomin Brands – Outback, Carraba’s, etc. (BLMN) and Brinker – Chili’, Maggiano’s, etc. (EAT) are outperforming the others and have seen their stocks rise significantly since the beginning of the year. Analysts think there is more room for these stocks to run.

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