The world's top 10 restaurant companies, arranged by market capitalization—from McDonald's to Brinker International—are mostly chain operations. Despite the cyclical nature of discretionary restaurant spending, some companies have positioned themselves to weather all types of economic cycles, managing to consistently maintain profitable growth over the long term.
These companies—listed by descending market capitalization—are the largest restaurant companies in the world.
(Note: All numeric figures updated Feb. 8, 2019)
McDonald’s Corporation (MCD) is the largest fast-food restaurant chain in the world, with roughly 37,000 locations in more than 115 countries. McDonald’s has staked its claim in the industry through its affordable food and lightning-fast service. With new CEO Steve Easterbrook, who took the helm in 2015, McDonald's is looking to improve its operations, which included refranchising 4,000 locations by the end of 2018 and reducing its selling, general, and administrative (SG&A) expenses by of $500 million per year. Management also believes the company can increase its franchisee penetration in China to 25%.
McDonald's originally sold hot-dogs rather than hamburgers.
Starbucks Corporation (SBUX) is the world's leading coffee retailer, with more than 27,000 stores globally. The company sells high-quality coffees, teas, and other beverages, along with a variety of fresh food items. Starbucks created a reinvigorated food and beverage menu, as well as improved store designs, to improve customer experience. Management also believes the company is well-positioned to adapt to evolving consumer behaviors, thanks to branding that transcends channels with digital, social media, and loyalty programs. Starbucks is constantly developing a compelling story of domestic growth through new store formats, such as express stores, beverage trucks, and drive-throughs.
Yum! Brands, Inc. (YUM) is the largest quick-service restaurant company in the world, with more than 45,000 restaurants across 125 countries. The company is most known for its franchise chains KFC, Pizza Hut, and Taco Bell, and it owns a controlling interest in China’s Little Sheep. The largest growth potential comes from Yum!'s presence in China. Last year, more than one-third of its revenue was derived from this area, and it continues to grow; the current Chinese market is fragmented, with no dominant force. The Chinese middle class is growing, areas are becoming more urbanized, and the market is becoming more conducive to franchising. So, Yum! Brands are well-positioned to claim the future stake as the largest Chinese franchise restaurant company.
Chipotle Mexican Grill
Chipotle Mexican Grill, Inc. (CMG) was created with a simple idea that food served fast did not have to provide the standard—often lower quality—fast-food experience. It has a simple, customizable menu featuring naturally raised and organic products.
Sourcing from local ranchers and farmers gives Chipotle Mexican Grill more influence with suppliers than its larger competitors.
In 2017, Chipotle had $4.4 billion in sales (2018 numbers were not available at the time of publication), making it the leader in the Mexican food category and a large player in the overall $40 billion fast-food sectors.
Restaurant Brands International
Restaurant Brands International, Inc. (QSR) is the third-largest global quick-service restaurant chain created by a high-profile merger of Burger King and Tim Horton's franchise brands. The two have developed strategies that they plan to execute for the next few years. With influence from 3G Capital as a 51% shareholder, the company's stock price should see more ramps, as it did from its lows in 2016 to late 2017 when the price per share more than doubled.
Darden Restaurants Inc. (DRI) owns and operates several dining restaurant brands, such as Red Lobster, Olive Garden, LongHorn Steakhouse, Bahama Breeze, Seasons 52, Eddie V’s, and Yard House. Darden has recently implemented a number of structural and operational changes under its CEO, Gene Lee, who took over in 2015. Management plans to deliver revenue growth and margin improvements through an increased emphasis on everyday value, a reduction in deep discounting, and greater takeout and alcoholic beverage sales. Darden also implemented a short-term initiative for its real estate holdings, including ongoing sales-leaseback transactions for 64 restaurant properties and a spinoff of 424 company properties into a standalone real estate investment trust (REIT) that goes by the Four Corners Property Trust (FCPT).
Domino's Pizza Inc. (DPZ) in 2018 was the largest pizza company in the world, with more than 11,600 stores. Domino's offers a wide range of choices for pizza products, such as traditional hand-tossed pizza, Brooklyn-style pizza, and pizza with crunchy, thick crusts. Domino's has also increased its margins with complementary items, such as oven-baked sandwiches, pasta, boneless chicken and wings, chocolate cakes, and soft drinks. Management's long-term growth plan is to grow global retail sales through a combination of higher same-store sales and new openings. The company underwent a successful rebranding in 2013, which is one of the causes of positive revenue growth since then.
Panera Bread Company, Inc. (PNRA) operates more than 1,800 company and franchise-owned bakery-cafes that feature organic and all-natural products. In 2014, the company announced its Panera 2.0 customer experience which resulted in improved operational performance. The experience focuses on customers having better ways to order, such as advance ordering for takeout, ordering from the table for dine-in, and fast lane kiosks. Currently, franchisees represent 51% of all the Panera Bread locations, and management expects this to grow closer to 65% over the long term. The growth of franchises allows the company to collect a royalty of 5% of gross sales from each location, creating a stable and predictable income stream.
Dunkin' Brands Group
Dunkin' Brands Group, Inc. (DNKN) is a holding company with more than 11,000 Dunkin' Donuts and 7,800 Baskin-Robbins franchises across the globe. Mainly known as a doughnut and coffee chain, Dunkin' Donuts has expanded its service and menu items, such as adding breakfast sandwiches, bakery sandwiches, and frozen and iced beverages. Franchisees own all the Dunkin' Donuts and Baskin-Robbins locations, providing an annuity-like stream of royalties to Dunkin' Brands Group. Each restaurant provides average cash returns of almost 20%, which should attract a large base of new franchise owners. Dunkin' Brands believes that it can double the number of its U.S. stores from 8,300 to 17,000.
Brinker International, Inc. (EAT) operates or franchises about 1,600 casual dining restaurants, mostly consisting of the Chili's and Maggiano's chains. Management's long-term vision for the company is a dominant global position in casual-dining restaurants. Brinker plans to grow by continuing to differentiate its brands from its competition, reducing the costs associated with managing its restaurants and establishing a strong presence in key markets around the globe.