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Restaurants Go Contactless to Brace Against Coronavirus: 4 Picks

Ritujay Ghosh

Contactless delivery is becoming the new normal, be it for grocery, consumer goods or food. The coronavirus pandemic has changed the way businesses have operated so long. Both customers and retailers are concerned about their health and in a bid to maintain social distancing are opting for contactless delivery.

With the economy now reopening, restaurants — which so long remained closed — have also started operations again but an increasing number of customers want their food to be delivered without any contact. This has seen many restaurants completely changing the way they have so long served food so long.

Restaurants Shift Focus to Contactless Delivery

On Jun 29, Dominos Pizza, Inc. DPZ unveiled its Domino’s Carside Delivery service. The offering is a contactless carryout method that diners can opt for when they make their prepaid eCommerce orders and can be used at stores across the United States, the company said. Also, customers can request their order to be delivered to the back seat, the passenger side, the trunk or a choice to be determined at the time they get to the store. Customers can notify the restaurant that they have arrived at the store via a text message or by tapping a button on the Domino’s Tracker page.

Dominos had been focusing on contactless delivery since the beginning of the coronavirus outbreak. This also helped the company keep most of its U.S. stores open during the pandemic. Restaurants stocks took a massive hit during the pandemic as most had to suspend their operations following the government mandate. However, those with facilities of online order and other modes of contactless delivery managed to survive the COVID-19 bloodbath.

Contactless Delivery the New Normal

The retail industry that includes restaurants took a massive beating during the coronavirus-induced lockdown, as most people stayed indoors. However, those with an online presence and option for contactless delivery were a lot at ease. According to a Dragontail survey, 70% of customers had more food delivered during the pandemic. And of those who said they used aggregator apps more than before, over 70% said they would be more inclined to order for carryout over delivery if given the option for a contactless experience.

Needless to say, contactless delivery, which till some time back many said failed to give the experience of sitting at a restaurant and having one’s food, is becoming a preferred way of having outside food after the COVID-19 outbreak. In fact, contactless carryout offers the same impersonal experience some customers actually seek but provides better food quality, and a more profitable channel for restaurants. Not to mention, it’s also going to be cheaper for the consumer.

Our Choices

As contactless delivery becomes the new normal, we suggest four restaurant stocks for investors that managed to survive the pandemic on this facility and are poised to grow on its growing popularity.

Dominos Pizza, Inc.never really closed down its operations during the pandemic. In fact, they had to shutter a meager 20 outlets across the United States and continued to serve customers with it contactless delivery system that has now been expanded across all its outlets in the United States.

The company’s expected earnings growth rate for the current year is 18.3%. The Zacks Consensus Estimate for current-year earnings has improved 3.6% over the past 60 days. Dominos has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Jack In The Box, Inc. JACK is a restaurant company that operates and franchises through Jack in the Box quick-service restaurants, and is one of the nation’s largest hamburger chains. Of the total revenues, 70% comes through drive-in and another 15% through takeaways. This saved the company during the pandemic as it quickly switched to contactless delivery through its mobile app, drive-through and takeout delivery.

The company’s expected earnings growth rate for next year is 22.7%. The Zacks Consensus Estimate for current-year earnings has improved 23.5% over the past 60 days. Jack In The Box sports a Zacks Rank #1.

Chipotle Mexican Grill, Inc. CMG together with its subsidiaries operates quick-casual and fresh Mexican food restaurant. The chain features free-range, hormone-free pork, natural chicken and other meat products cooked through traditional methods and served in a unique atmosphere.

Soon after shutdowns began, it augmented digital capabilities by offering contactless pick-up and delivery, and by advertising more heavily online and on streaming channels. These actions helped its digital channels to grow 102.6% year over year to a total 37.6% of its sales. Also, Chipotle ranked as the top restaurant brand for health and safety compliance during COVID-19, according to data from global market research firm Ipsos' Consumer Health & Safety Index.

The company’s expected earnings growth rate for next year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 18.2% over the past 60 days. Chipotle carries a Zacks Rank #2.

Papa John’s International, Inc. PZZA operates and franchises pizza delivery and carryout restaurants in the United States and other specific international markets. The company’s dine-in and delivery restaurants operate under the brand name Papa John’s.

Soon after the coronavirus outbreak Papa John’s rolled out a “no-contact delivery” measure to ensure the safety of its customers and employees. Since then, the company has received tremendous response to the Leave at my Door option that eliminates in-person handoffs.

The company’s expected earnings growth rate for the current year is 7.7%. The Zacks Consensus Estimate for current-year earnings has improved 6.8% over the past 30 days. Papa John’s holds a Zacks Rank #2.

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