In a world of rising costs and economic uncertainty, finding the best restaurant stocks to buy that maintain healthy profit margins is crucial for investors. The restaurant industry, while known for its competitive nature, offers some hidden gems that possess incredible pricing power.
This pricing power means that they can pass on higher costs to customers without a significant dent in demand. Furthermore, there are companies that are highly diversified owning multiple notable brands that perform well in any macroeconomic environment. Investing in these companies can offer a shield against inflation and provide potential for long term growth.
Now, let’s unpack the 3 best restaurants to buy with incredible pricing power in 2024!
McDonald’s Corp (MCD)
McDonald’s (NYSE:MCD) is one of the most notable restaurant chains and brands in the world. Their diverse menu options, consistency, and operational efficiency allow it to maintain profitability and strong cash flows even amid rising food and labor costs.
McDonald’s has carefully cultivated a perception of value. Even in the midst of higher prices, customers still remain loyal to the brand. While consumers have harped on the fact that inflation has caused fast food prices to rise substantially, MCD is honing in on its loyalty rewards program.
This will not only drive more foot traffic to the restaurant chain but also save customers money with more customized offers. In the 2023 fiscal year, McDonald’s comparable sales grew 9% YOY. Systemwide sales from loyalty members surpassed more than $20 billion, as the company continues to streamline its offerings in Google (NASDAQ:GOOG) Cloud.
With their restaurant expansion plans underway, 2024 could be the start of MCD’s ascension to new heights.
Restaurant Brands International (QSR)
Restaurant Brands International (NYSE:QSR) is a formidable player in the fast food arena, known for its iconic brands like Burger King, Tim Hortons, and Popeyes. This multi-brand approach each appeals to a different consumer segment, increasing its overall pricing power.
Restaurant Brands International’s portfolio of unique brands give the company a significant edge in the fast food industry. They are one of the largest restaurant companies in the world with more than 30,000 restaurants in more than 100 countries.
Furthermore, QSR maintains a relentless focus on cost control, ensuring that price increases don’t entirely erode profit margins. In FY23, revenue increased 8% YOY to $7.02 billion. Global system-wide sales increased 12.2%, with EPS up 16% YOY to $3.76 per share. With substantial scale, operational expertise and better input costs, QSR can mitigate the impacts of inflation on their bottom line.
This makes QSR stock one of the top restaurant stocks to buy in 2024.
Yum! Brands (YUM)
Yum! Brands (NYSE:YUM) holds a sizable global footprint, owning the powerhouses KFC, Pizza Hut and Taco Bell. Their international reach enables the company to implement price adjustments across diverse markets, reducing its vulnerability to price sensitivities in any one region.
Yum! Brands consistently introduce limited-time offers and value-driven menu options. This strategy is well orchestrated, making customers feel they’re getting a good deal even when prices rise for their core menu options.
While this may seem evil, it is the inevitable game of the restaurant chain business. Moreover, this tactic can help soften the blow of rising prices, while keeping its customers loyal to their brands. The 2023 fiscal year was transformative with broad strength across the globe. System-wide sales grew 10% year over year surpassing more than $60 billion while opening up 4,700 new restaurants.
The company is also ramping up its digital ordering and delivery channels incorporating AI and machine learning to drive growth. 2024 will represent another strong year of global growth, making YUM stock one of the best restaurant stocks to buy now.
On the date of publication, Terel Miles did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
