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4 Restaurant Stocks Likely to be Scooped Up by Millennials

Zacks Equity Research

Millennials are the most diverse and educated generation of the United States and also form a significant part of its population.

Their growing financial ability coupled with spending habits, proclivity toward technology and investment preferences are expected to become a driving force for the country’s economy in the years to come.

So Are They Stock Investors?

Yes, they are. Also, their stock purchase behavior has considerable impact on the market. With age on their side, they have a long-time horizon for investment. This allows them to take risks and focus more on capital appreciation than dividend income. They like stocks that have the potential for upside.

Do They Pick Restaurant Stocks?

Millennials have a tendency to turn to sectors that they are familiar with and companies whose products or services are part and parcel of their lives. Probably that’s why restaurant is one of their preferred sectors along with technology, Internet commerce and, auto and fitness.

The restaurant space holds much interest for them. On busy weekdays, it’s all about fast food joints and takeways and during the weekend, it’s about dining out with family and friends. This trend has been motivating food chains like McDonald’s, Darden and Papa John’s to ramp up their efforts to meet the demands of millennials.

4 Key Picks for Gen Y

We have handpicked four restaurant stocks that are not only catching the attention of millennials through sales boosting and digital initiatives but also of the stock market with strong fundamentals and growth prospects.

Most of Dunkin' Brands Group DNKN sales efforts are millennial friendly. The company is also growing in terms of its usage of digital technology through DD card, DD mobile app, DD Perks rewards program, On-the-Go ordering and delivery. These initiatives make Dunkin' Donuts more convenient and accessible for customers.

The company's mobile ordering service — On-the-Go — is available nationwide exclusively for Dunkin' Donuts DD Perks Rewards Program members.

Recently, the company opened its first next generation concept store in Quincy, MA where it deployed an exclusive On-the-Go drive-through facility. This allows Dunkin' Donuts’ DD Perks Rewards Program members, who order in advance using Dunkin's Mobile App, to skip queues and head straight to the pickup lane. The company expects to see a larger percentage of Dunkin’ restaurants with drive-thrus (85% in 2017, compared to only 70% five years ago).

Dunkin' Brands sports a Zacks Rank #1 (Strong Buy). Its earnings in 2018 are expected to improve 14.2%.

You can see the complete list of today’s Zacks #1 Rank stocks here.  

Dunkin' Brands Group, Inc. Price

Dunkin' Brands Group, Inc. Price | Dunkin' Brands Group, Inc. Quote

Brinker International’s EAT digital initiatives — particularly those around Chilli’s — also offers a lot to millennials to cheer. The company is investing heavily in technology-driven initiatives like online ordering, to augment sales and boost guest services.

Having installed a tabletop technology at its company-owned restaurants in partnership with Ziosk, the company has implemented handheld devices at its restaurants in California. This is resulting in increased efficiency and speed.

Meanwhile, the company’s partnership with mobile and online food ordering service, Olo, for its To-Go platform, continues to provide digital services to restaurants and offers Chili's customers with pre-order, group order and pay flexibility. This integration is helping the company garner more members for the loyalty program, and thereby retain customers.

Brinker also stands to gain from integrating its My Chili's Reward program with Plenti — a rewards program by American Express that offers leading brands across multiple categories.

Moreover, the company launched a digital curbside platform at its company-owned restaurants. With about half of the company’s online guests using it, the service is ensuring simpler, faster and effortless experience to take-out guests, thereby resulting in higher check.

Brinker carries a Zacks Rank #2 (Buy). Its earnings in 2018 are expected to improve 3.8%.

Brinker International, Inc. Price

Brinker International, Inc. Price | Brinker International, Inc. Quote

The majority of McDonald's MCD sales efforts are also millennial oriented. Apart from focusing on product innovation, offering a value menu and rolling out more limited-time offerings, the company has undertaken several digital initiatives.

It is accelerating Experience of the Future (EOTF) deployment in the United States, building on its success in markets around the world. The rollout of self-order kiosks, digital menu boards, table service, and the mobile app offer customers more choices and flexibility. Nearly all of its U.S. restaurants are now using digital menu boards.

McDonald's carries a Zacks Rank #2. Its earnings in 2018 are expected to improve 10.4%.

McDonald's Corporation Price

McDonald's Corporation Price | McDonald's Corporation Quote

Knowing that ordering delivery from restaurants is a growing habit among millennials, Cracker Barrel Old Country Store CBRL looking to grow its off-premise through marketing efforts like social and digital messaging, geo-targeted consumer emails and in-store collateral.

The company continues to invest in its product line-up, the guest experience and employee training to support the long-term plans within this space. Multiple delivery options will also be tested this fiscal year.

Cracker Barrel carries a Zacks Rank #2. Its earnings in 2018 are expected to improve 8.4%.

Cracker Barrel Old Country Store, Inc. Price

Cracker Barrel Old Country Store, Inc. Price | Cracker Barrel Old Country Store, Inc. Quote

Others Stocks to Keep an Eye On

Starbucks Corporation SBUX has secured a leading position in leveraging its mobile and digital assets and loyalty and e-commerce platforms to create more revenue streams. The company’s mobile app is undoubtedly one of the most widely used mobile payment apps in the United States.

Starbucks’ other digital initiatives includes My Starbucks Barista ordering system and Digital Order Manager or DOM. This DOM is a high-value, low-cost technology to further optimize store operations and elevate customer experience.

Buffalo Wild Wings BWLD is also investing heavily in technology-driven initiatives to boost sales. By installing tablets at all its restaurants, the company aims to provide exclusive social gaming opportunities, and sports content to customers, thereby improving guest satisfaction.

Apart from its mobile app, the company’s Game Break app allows customers to play fantasy games on their mobile devices, online or on tablets at the restaurant. Such initiatives are expected to boost the company’s reputation of being a sports bar and restaurant and increase traffic at its outlets.

These companies carry a Zacks Rank #3 (Hold) that could definitely change as soon as their sales boosting efforts start showing meaningful results.

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Cracker Barrel Old Country Store, Inc. (CBRL) : Free Stock Analysis Report
 
Buffalo Wild Wings, Inc. (BWLD) : Free Stock Analysis Report
 
Starbucks Corporation (SBUX) : Free Stock Analysis Report
 
McDonald's Corporation (MCD) : Free Stock Analysis Report
 
Dunkin' Brands Group, Inc. (DNKN) : Free Stock Analysis Report
 
Brinker International, Inc. (EAT) : Free Stock Analysis Report
 
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