Quick-service (aka fast food) restaurants may want to herd customers in and out as swiftly as possible, but when it comes to their numbers, it’s worth slowing down a little.
For example, on any given day, the restaurant industry generates around $1.8 billion in sales. In July 2013, industry sales came in at $45.83 billion, a 17.7% increase over the $38.93 billion recorded in July 2010. When it comes to pulling your weight, few do it like fast food employees: in 2011, sales per full-time-equivalent (non-supervisory) employee were a jaw-dropping $83,947. For investors, restaurant stocks can make a lot of money. (Sources: “America Shops: U.S. Retail and Food Service Sales,” The Wall Street Journal, August 13, 2013; “2013 Restaurant Industry Pocket Factbook,” Restaurant.org, 2013.)
It takes a lot of people to generate these daily sales for restaurant stocks; in fact, it takes more than 13 million people, or nearly 10% of the U.S. workforce. Over the next decade, the restaurant industry is expected to add a further 1.3 million jobs, reaching 14.4 million by 2023.
Perhaps not surprisingly, restaurant industry jobs growth has, for the past 13 consecutive years (2000 to 2013) and counting, outpaced the overall U.S. economy. On the whole, restaurants and restaurant stocks are a good barometer of the health of the economy. If restaurant stocks are reporting solid growth, it means Americans have more disposable income.
While a handful of restaurant stocks like McDonalds Corporation (NYSE/MCD), Burger King Worldwide Inc. (NYSE/BKW), and The Wendy’s Company (NASDAQ/WEN) may grab most of the attention, there are a large number of other restaurant stocks out there, some well known and others not so much (yet), with excellent growth opportunities.
BJ’s Restaurants, Inc. (NASDAQ/BJRI) has grown from a single store in Santa Ana, California (1978) to 137 locations, and it expects that number to grow significantly. The company said recently that it believes there is room for “at least 425 BJ’s Restaurants domestically.” (Source: “BJ’s Restaurants, Inc. Holds Annual Meeting of Shareholders,” BJ’s Restaurants, Inc. web site, June 6, 2013.)
The company’s share price recently slipped after it announced second-quarter net income dropped four percent and revenues were up just 10%. After slipping 13%, this restaurant stock’s share price rebounded off a support level and is up almost seven percent since the beginning of August. Some analysts might not be too keen on BJ’s right now, but I think it represents a great long-term opportunity.
Another interesting restaurant stock, Buffalo Wild Wings, Inc. (NASDAQ/BWLD), or “BW3” to patrons, reported a 21.3% sales growth year-over-year in 2012. The company recently announced that second-quarter revenue was up 27.8% at $305.0 million, while net income increased 41.4% to $16.5 million, or $0.88 per share. This restaurant stock is up almost 50% year-to-date, and for fiscal 2013, it expects to achieve 17% net earnings growth.
Debt levels may be up and personal cash reserves down, but Americans continue to dine out in growing numbers. For investors, that’s good news for those who like restaurant stocks.
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