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3 Restaurant Stocks Positioned to Grow Despite Industry Struggles
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The Zacks Retail – Restaurants industry is under pressure from high menu prices and tight consumer budgets, which are weighing on traffic. Rising labor, food and occupancy costs are further squeezing margins. However, the industry is benefiting from steady demand for convenience, growth in digital ordering, ongoing unit expansion and a focus on convenience-led formats. Stocks like Starbucks Corporation (SBUX - Free Report) , Yum China Holdings, Inc. (YUMC - Free Report) and Dutch Bros Inc. (BROS - Free Report) are well-poised to benefit from the factors mentioned above.
Industry Description
The Zacks Retail-Restaurants industry comprises several owners and operators of casual, upscale casual, fine dining, full-service and fast-casual restaurants. Some industry participants operate as roasters, marketers and retailers of specialty coffee. Some companies develop, operate and franchise quick-service restaurants worldwide. A few restaurant operators offer cooked-to-order dishes, including noodles and pasta, soups, salads and appetizers. Some industry players develop, own, operate, manage and license restaurants and lounges worldwide. A few companies also run technology-enabled Japanese restaurants in the United States and provide Japanese cuisine through a revolving sushi service model.
4 Trends Shaping the Future of the Restaurant Industry
Challenging Market Landscape: The industry is grappling with a macroeconomic environment marked by persistent inflation and reduced consumer purchasing power. The restaurant industry has been facing declining traffic for quite some time. A rapid increase in menu prices is the primary reason behind traffic erosion. This decline highlights the ongoing challenges that the industry faces in maintaining customer counts, especially as consumers grow frustrated with rising prices.
Intense competition and high wages are concerning. The industry continues to bear increased expenses, which have been affecting margins. Higher pre-opening costs, marketing expenses and costs related to sales-boosting initiatives are exerting pressure on the company’s margins.
U.S. Restaurant Industry Outlook 2026: According to the National Restaurant Association, the U.S. restaurant industry is expected to post steady yet modest growth in 2026, with total sales projected to reach roughly $1.55 trillion. The outlook indicates resilient consumer demand for convenience, off-premise dining and on-the-go options, but the operating environment remains challenging. Elevated labor, food and occupancy costs continue to pressure margins, while price-sensitive consumers are limiting traffic growth. As a result, much of the industry’s expansion is likely to be driven by pricing and average check increases rather than a sharp rebound in customer visits, keeping the overall tone cautiously optimistic.
Convenience Trends and Digital Adoption Support Demand: Consumers are increasingly prioritizing speed and ease, leading to stronger demand for drive-thru, takeaway and delivery services. Restaurants are investing heavily in mobile apps, loyalty programs and AI-powered tools to streamline ordering, reduce wait times and offer personalized promotions. These initiatives not only improve the customer experience but also encourage repeat visits and higher spending, helping brands maintain demand even in a cautious spending environment.
Unit Expansion and Strategic Pricing Drive Sales Growth: Restaurant operators are accelerating expansion through new store openings, smaller formats and entry into untapped markets to capture incremental demand. At the same time, they are using targeted pricing strategies, such as premium menu items, bundled offerings and limited-time deals, to increase average check sizes. This combination of footprint growth and smarter pricing is enabling the industry to sustain revenue growth, even as overall traffic recovery remains gradual.
The Zacks Industry Rank Indicates Dull Prospects
The Zacks Restaurant industry is grouped within the broader Retail-Wholesale sector. The industry carries a Zacks Industry Rank #175, which places it in the bottom 28% of more than 244 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates dull near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
The industry’s position in the bottom 50% of the Zacks-ranked industries results from a negative earnings outlook for the constituent companies in aggregate. Before we present a few stocks that you may want to consider for your portfolio, let us take a look at the industry’s recent stock-market performance and valuation picture.
Industry Underperforms the S&P 500 and the Sector
The Zacks Retail-Restaurants industry has underperformed the Zacks S&P 500 composite and its sector over the past year.
Over this period, the industry has gained 1.2% compared with the Zacks S&P 500 composite’s rise of 37.3%. The sector has increased 21.8%.
1-Year Price Performance
Restaurant Industry's Valuation
Based on the forward 12-month P/E, a commonly used multiple for valuing restaurant stocks, the industry is currently trading at 24.01X compared with the S&P 500’s 21.91X. It is down from the sector’s forward 12-month P/E ratio of 25.05X.
Over the past five years, the industry traded as high as 30.52X and as low as 22.08X, the median being 25.03X.
3 Key Restaurant Picks
Starbucks: The company is benefiting from solid international momentum, improved operational discipline and steady progress under its “Back to Starbucks” turnaround strategy. Strength across key global markets such as China, Japan and the United Kingdom, along with advancements in digital platforms and delivery capabilities, is supporting performance. Looking ahead, Starbucks is focused on enhancing efficiency, optimizing the store portfolio and driving menu innovation to reinforce its competitive positioning.
Shares of this Zacks Rank #2 (Buy) company have gained 16.4% in the past six months. SBUX’s fiscal 2026 sales and earnings are anticipated to rise 3.2% and 8.5%, respectively, year over year.
Yum China: The company is gaining from solid growth in systemwide and same-store sales, supported by strong delivery momentum and contributions from new store openings. Continued focus on menu innovation, expansion of the store base and ongoing digital initiatives is expected to further support growth and strengthen Yum China’s market position.
Shares of this Zacks Rank #2 company have gained 8.2% in the past six months. YUMC’s 2026 sales and earnings are anticipated to rise 7.8% and 15.9%, respectively, year over year.
Price and Consensus: YUMC
Dutch Bros: The company is benefiting from robust traffic trends, driven by strong customer loyalty and growing digital engagement. The stock has outperformed the broader industry over the past six months, reflecting solid execution. Dutch Bros continues to expand in a disciplined manner, supported by attractive store-level economics. Meanwhile, ongoing innovation and its expanding food offerings are opening up additional avenues for revenue growth.
Shares of this Zacks Rank #2 company have declined 9.8% in the past six months. BROS’ 2026 sales and earnings are anticipated to rise 24.5% and 18.4%, respectively, year over year.
Price and Consensus: BROS
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3 Restaurant Stocks Positioned to Grow Despite Industry Struggles
The Zacks Retail – Restaurants industry is under pressure from high menu prices and tight consumer budgets, which are weighing on traffic. Rising labor, food and occupancy costs are further squeezing margins. However, the industry is benefiting from steady demand for convenience, growth in digital ordering, ongoing unit expansion and a focus on convenience-led formats. Stocks like Starbucks Corporation (SBUX - Free Report) , Yum China Holdings, Inc. (YUMC - Free Report) and Dutch Bros Inc. (BROS - Free Report) are well-poised to benefit from the factors mentioned above.
Industry Description
The Zacks Retail-Restaurants industry comprises several owners and operators of casual, upscale casual, fine dining, full-service and fast-casual restaurants. Some industry participants operate as roasters, marketers and retailers of specialty coffee. Some companies develop, operate and franchise quick-service restaurants worldwide. A few restaurant operators offer cooked-to-order dishes, including noodles and pasta, soups, salads and appetizers. Some industry players develop, own, operate, manage and license restaurants and lounges worldwide. A few companies also run technology-enabled Japanese restaurants in the United States and provide Japanese cuisine through a revolving sushi service model.
4 Trends Shaping the Future of the Restaurant Industry
Challenging Market Landscape: The industry is grappling with a macroeconomic environment marked by persistent inflation and reduced consumer purchasing power. The restaurant industry has been facing declining traffic for quite some time. A rapid increase in menu prices is the primary reason behind traffic erosion. This decline highlights the ongoing challenges that the industry faces in maintaining customer counts, especially as consumers grow frustrated with rising prices.
Intense competition and high wages are concerning. The industry continues to bear increased expenses, which have been affecting margins. Higher pre-opening costs, marketing expenses and costs related to sales-boosting initiatives are exerting pressure on the company’s margins.
U.S. Restaurant Industry Outlook 2026: According to the National Restaurant Association, the U.S. restaurant industry is expected to post steady yet modest growth in 2026, with total sales projected to reach roughly $1.55 trillion. The outlook indicates resilient consumer demand for convenience, off-premise dining and on-the-go options, but the operating environment remains challenging. Elevated labor, food and occupancy costs continue to pressure margins, while price-sensitive consumers are limiting traffic growth. As a result, much of the industry’s expansion is likely to be driven by pricing and average check increases rather than a sharp rebound in customer visits, keeping the overall tone cautiously optimistic.
Convenience Trends and Digital Adoption Support Demand: Consumers are increasingly prioritizing speed and ease, leading to stronger demand for drive-thru, takeaway and delivery services. Restaurants are investing heavily in mobile apps, loyalty programs and AI-powered tools to streamline ordering, reduce wait times and offer personalized promotions. These initiatives not only improve the customer experience but also encourage repeat visits and higher spending, helping brands maintain demand even in a cautious spending environment.
Unit Expansion and Strategic Pricing Drive Sales Growth: Restaurant operators are accelerating expansion through new store openings, smaller formats and entry into untapped markets to capture incremental demand. At the same time, they are using targeted pricing strategies, such as premium menu items, bundled offerings and limited-time deals, to increase average check sizes. This combination of footprint growth and smarter pricing is enabling the industry to sustain revenue growth, even as overall traffic recovery remains gradual.
The Zacks Industry Rank Indicates Dull Prospects
The Zacks Restaurant industry is grouped within the broader Retail-Wholesale sector. The industry carries a Zacks Industry Rank #175, which places it in the bottom 28% of more than 244 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates dull near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
The industry’s position in the bottom 50% of the Zacks-ranked industries results from a negative earnings outlook for the constituent companies in aggregate. Before we present a few stocks that you may want to consider for your portfolio, let us take a look at the industry’s recent stock-market performance and valuation picture.
Industry Underperforms the S&P 500 and the Sector
The Zacks Retail-Restaurants industry has underperformed the Zacks S&P 500 composite and its sector over the past year.
Over this period, the industry has gained 1.2% compared with the Zacks S&P 500 composite’s rise of 37.3%. The sector has increased 21.8%.
1-Year Price Performance
Restaurant Industry's Valuation
Based on the forward 12-month P/E, a commonly used multiple for valuing restaurant stocks, the industry is currently trading at 24.01X compared with the S&P 500’s 21.91X. It is down from the sector’s forward 12-month P/E ratio of 25.05X.
Over the past five years, the industry traded as high as 30.52X and as low as 22.08X, the median being 25.03X.
3 Key Restaurant Picks
Starbucks: The company is benefiting from solid international momentum, improved operational discipline and steady progress under its “Back to Starbucks” turnaround strategy. Strength across key global markets such as China, Japan and the United Kingdom, along with advancements in digital platforms and delivery capabilities, is supporting performance. Looking ahead, Starbucks is focused on enhancing efficiency, optimizing the store portfolio and driving menu innovation to reinforce its competitive positioning.
Shares of this Zacks Rank #2 (Buy) company have gained 16.4% in the past six months. SBUX’s fiscal 2026 sales and earnings are anticipated to rise 3.2% and 8.5%, respectively, year over year.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: SBUX
Yum China: The company is gaining from solid growth in systemwide and same-store sales, supported by strong delivery momentum and contributions from new store openings. Continued focus on menu innovation, expansion of the store base and ongoing digital initiatives is expected to further support growth and strengthen Yum China’s market position.
Shares of this Zacks Rank #2 company have gained 8.2% in the past six months. YUMC’s 2026 sales and earnings are anticipated to rise 7.8% and 15.9%, respectively, year over year.
Price and Consensus: YUMC
Dutch Bros: The company is benefiting from robust traffic trends, driven by strong customer loyalty and growing digital engagement. The stock has outperformed the broader industry over the past six months, reflecting solid execution. Dutch Bros continues to expand in a disciplined manner, supported by attractive store-level economics. Meanwhile, ongoing innovation and its expanding food offerings are opening up additional avenues for revenue growth.
Shares of this Zacks Rank #2 company have declined 9.8% in the past six months. BROS’ 2026 sales and earnings are anticipated to rise 24.5% and 18.4%, respectively, year over year.
Price and Consensus: BROS
