“Where’s the beef?” How can it be that burgers have almost no relation to the fastest growing restaurant chains in the country? You could say that burgers, and to a lesser extent pizza, have matured. But the real answer is the rise of the health-conscious consumer. The days of people not caring about what they eat are over. Most consumers want natural and organic food, not greasy, fried foods. The following list of restaurants are ranked by sales growth. You might be surprised by what company proudly owns that coveted top spot. You might also find some investing opportunities along the way. (For related reading, see: Most Iconic Restaurant Chains That No Longer Exist.)
All numbers below as of June 24, 2015. Information via Nation’s Restaurant News.
10. Buffalo Wild Wings Inc.
Sales Growth: 16.3%
Total Unit Growth: 7.6%
Estimated Sales Per Unit (ESPU) Growth: 6.7%
At the exact time of this writing, the S&P 500 was down 14 points intraday, yet Buffalo Wild Wings Inc. (BWLD) was up 0.47%. This is much more likely to happen with fast-growth stocks. Buffalo Wild Wings also has $113.62 million in total cash and no long-term debt. On the other hand, there is a 13.20% short position, which could relate to the stock’s relatively high valuation as it trades at 32 times earnings. Despite rampant growth, BWLD has depreciated 4.31% over the past year and as a growth stock, there is no dividend yield. (For more, see: Investors Feasting on Restaurant Stocks.)
Sales Growth: 17.2%
Total Unit Growth: 11.0%
Zaxby’s, a chain of franchise fast casual restaurants serving chicken fingers, wings, sandwiches and salads, is expanding west domestically, which should lead to continued growth. Its has over 600 locations and opened 65 last year, 49 of which were franchised, which helps reduce costs. Zaxby’s is a private company.
8. Casey’s General Stores
Sales Growth: 17.7%
Total Unit Growth: 4.0%
Casey's General Stores, Inc. (CASY) owns and operates over 1,850 convenience stores in 14 Midwestern states. The company has grown its top line consistently on annual basis over the past three years and its bottom line has been steady. The debt-to-equity ratio is respectable at 0.97, the short position is relatively low at 3.20, and there is a 0.90% yield. The most impressive stat is that the stock has appreciated 37.01% over the past year. (For more, see: Can Casey's Ring Up Better Cash Flow?)
7. Jimmy John's
Sales Growth: 19.8%
Total Unit Growth: 17.0%
Jimmy John’s is now the third-largest sandwich shop in the United States behind Subway and Arby’s. Jimmy John’s likes to be known for being “freaky fast.” All bread is baked and meats and vegetables chopped and sliced in-house.
6. Yard House
Sales Growth: 21.0%
Total Unit Growth: 13.5%
Yard House was acquired by Darden Restaurants, Inc. (DRI) in 2012 for $585 million. In 2014, Yard House sales were $478 Million. It offers over 100 draft beers. At a time when “beer snobbery” is more commonplace than at any time in history, those 100+ draft beers are enough to keep customers coming back. The Brewery Association recently reported that craft beer sales volume increased 17.6% in 2014. (For more, see: Expect Breakouts in These Stocks Soon.)
Sales Growth: 22.9%
Total Unit Growth: 13.9%
Wingstop Inc. (WING) went public just a few days ago. Since that time, the stock has depreciated 8.57%. There isn’t enough information on Wingstop to formulate an investment opinion, but based on the numbers consider keeping it on your radar. Once Securities and Exchange Commission (SEC) filings start rolling in, you will have a much better idea of where this company is headed.
4. Raising Cane's Chicken Fingers
Sales Growth: 23.5%
Total Unit Growth: 17.5%
Not much to report here since this is a small private company. First opened in 1996 in Based in Baton Rouge, La., it offers — you guessed it — chicken fingers (never frozen) and its own dipping sauce that employees have to swear to never reveal it's components.
3. Firehouse Subs
Sales Growth: 24.8%
Total Unit Growth: 18.0%
At first, Firehouse Subs specialized in hot subs but has since started offering cold ones, as well as lower-calorie options. However, the goal with that move isn’t to move the lines, it’s to increase foot traffic and generate more repeat business. Firehouse Subs currently has 840 units, and it plans to have 1,000 by the end of the year. (For more, see: Is Buying a Franchise Wise?)
2. Chipotle Mexican Grill, Inc.
Sales Growth: 27.3%
Total Unit Growth: 11.6%
When you think of natural and organic food in the restaurant industry, what’s the first name that comes to mind? If you’re like most people, then it’s Chipotle Mexican Grill Inc. (CMG). Since the demand for its food has been so high, Chipotle has been able to raise menu prices. This has not scared away customers. Also notice that Chipotle is tied for the highest ESPU on this list. Top and bottom-line growth has been consistent over the past three years and the debt-to-equity ratio is 0. On the other hand, the stock has only appreciated 2.65% over the past 12 months and is trading at 40 times earnings. Is it possible the stock suffers in the near future? Yes. Anything is possible. But the underlying company is strong and on the right track. (For more, see: Who are Chipotle's Main Competitors?)
1. Jersey Mike's Subs
Sales Growth: 29.3%
Total Unit Growth: 20.2%
Jersey Mike’s Subs seemed to come out of nowhere in regards to making this list. The reason: “A Sub Above” marketing campaign that was launched in March 2014. The focus of that campaign: ingredient quality.
The Bottom Line
You might find some investment opportunities on this list, but also recognize what types of restaurant chains are absent. Chicken, Mexican, subs and natural/organic are in; burgers and fries are out. Plan accordingly. (For more, see: How to Analyze Restaurant Stocks.)
Dan Moskowitz does not own shares in BWLD, CASY, DRI, WING or CMG.