For Immediate Release
Chicago, IL – January 10, 2017 – Today, Zacks Equity Research discusses the Industry: Restaurants, part 2, including BJ's Restaurants, Inc. (NASDAQ: (BJRI - Free Report) – Free Report ), Red Robin Gourmet Burgers Inc. (NASDAQ: (RRGB - Free Report) – Free Report ), Panera Bread Company (NASDAQ: (PNRA - Free Report) – Free Report ), Chipotle Mexican Grill, Inc. (NYSE: (CMG - Free Report) – Free Report ) and McDonald's Corp. (NYSE: (MCD - Free Report) – Free Report ).
Industry: Restaurants, part 2
As per National Restaurant Association’s data, 2016 marked the seventh consecutive year of real growth in restaurant sales. Meanwhile, restaurateurs are going, guns blazing, to counter comps and traffic issues with strong sales, digital initiatives and shift to consumer likings.
Taking the past trends and long-term growth prospects of the industry into account, we highlight a few positives of investing in the restaurant space:
Improving U.S. Economy : An improving U.S. economy and employment picture, along with rising consumer confidence, has contributed to slow but steady recovery in the restaurant industry. Though the decline in oil prices raised concerns of global deflation and economic slowdown, it has actually driven consumer spending, which accounts for over two-thirds of U.S. economic growth. Thus, stepped-up economic activities, improving business conditions, renewed optimism following the November election are expected to keep investors’ confidence high in 2017.
Various Sales Building Strategies : Endeavors to augment sales by targeting higher footfall and improvising on the menu are reaping benefits. Having stabilized their financial positions, restaurant operators are continually striving to add new items to their menu in order to cater to the ever-changing palates of customers while enhancing food presentation.
Another initiative undertaken by the food chains is re-imaging of stores, which has received overwhelming response from guests. Notably, reimaging of stores helps to create an appealing and differentiated concept that helps the brand connect better with guests, especially millennials.
Meanwhile, restaurant companies likeBJ's Restaurants, Inc. (NASDAQ: (BJRI - Free Report) – Free Report ), Red Robin Gourmet Burgers Inc. (NASDAQ: (RRGB - Free Report) – Free Report ), Panera Bread Company (NASDAQ: (PNRA - Free Report) – Free Report ) and more recently Chipotle Mexican Grill, Inc. (NYSE: (CMG - Free Report) – Free Report ) have started offering loyalty programs at their outlets to enhance value dining. Loyalty programs help retain previous diners while bringing in new ones, thereby driving traffic.
On the other hand, industry players like Brinker International, BJ's Restaurants and Red Robin Gourmet are rolling out prototypes and smaller restaurant chains to augment value and drive traffic, which in turn will lower construction and occupancy costs but boost return on invested capital. Notably, smaller prototypes also accelerate growth in non-traditional locations.
Modern Technology, Digital Ordering & Other Channels Gain Precedence : The digital wave has hit the U.S. fast casual restaurant sector as an increasing number of restaurateurs are deploying technology to enhance guest experience. The companies’ online and digital marketing activities have thus increased significantly over the past several years in response to increasing use of online and mobile web technology.
While smartphone apps attract consumers, video menu boards in quick-service restaurants and tabletop devices speed up sales and ensure convenience. Further, restaurant operators rely on social media for promotions and incorporateFacebook, Twitter and blogs aggressively into their marketing mix.
Chipotle is introducing more efficient food production lines to fulfill online orders, order-taking tablets in restaurants to bypass the lines and a new mobile optimized ordering site that provides an alternative to its iOS and Android ordering apps. Also, McDonald's Corp. (NYSE:(MCD - Free Report) – Free Report ) is undertaking digital initiatives to better serve customers, with over 90% of its U.S. restaurants now using digital menu boards.
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