These Fast Food Restaurants Are Crushing It

The top two most searched fast food/fast casual stocks in Trackstar, our proprietary sentiment indicator, continue to crush it not only among investors, but with consumers and against their peers. 

Every once in a while, The Juice likes to check in with Placer.ai. The company monitors foot traffic and compiles other data to help us understand the winners – and losers – across the retail landscape. 

Let’s review some of Placer.ai’s recent findings. 

First, McDonald’s (MCD) and Chipotle Mexican Grill (CMG) both continue to crush it. 

• In June 2023, visits to Chipotle were up 14.7%, compared to June 2022. Across fast casual establishments, visits only increased by 4.8% over the same timeframe. 
• In June 2023, visits to McDonald’s were up 9.7% year over year, relative to a 3.1% increase among all quick-service restaurants (QSR, or fast food). 
• In May 2023, when visits were actually down 0.4% across QSRs, McDonald’s grew that metric by 6.0%. 

There’s something to be said for becoming a household name. This helps both chains dominate. 

Of course, McDonald’s has long been a pop culture icon, if not synonymous with America. And you gotta give Chipotle props. It managed to become the king of elevated American-style Mexican food in short order. When you think of Mexican fast food in America, you’re likely to think Taco Bell (probably more likely when you’re drunk or high) or Chipotle. 

To read about another company with America and American-made written all over it, see Tesla Crushes Another Important Index. 

Part of the beauty of MCD and CMG is that, if you’re a long-term investor, you can ignore the day-to-day noise. That’s because both chains have broad appeal, which can help them weather economic downturns, while still being attractive to people doing well with money. You probably see this yourself on the ground, in your day to day. Walk into any McDonald’s and Chipotle and – not that we’re judging – you’ll see all types of people.  

While McDonald’s consumers tend to skew lower income and Chipotle higher, both have a diverse range of patrons. 

Consider these numbers from the bottom to top of the economic latter:

• This year, through June, households earning less than $15,000 a year comprised 7.9% of Chipotle’s audience (if you will) compared to 10.3% for McDonald’s. 
• People earning less than $50,000 make up 31.9% of Chipotle’s customer base versus 40.4% for McDonald’s. 

So not as much of a difference between the two on the low end as we might expect. 

• In the middle of the road, 28.8% of Chipotle visitors and 30.7% of McDonald’s patrons earn between $50,000 and $100,000. 
• 39.2% of Chipotle’s crowd makes more than $100,000 versus 29% for McDonald’s. So, at the high end, we start to see more meaningful divergence. 
• For fun, households making $500,000 or comprise 1.8% of Chipotle’s base compared to 1.0% for McDonald’s. 

If you’re a long-term investor, we think you should stop right there. There’s little use in owning fast food chains beyond these two behemoths. We’re not talking about the short-term. We’re talking about stocks you’ll take to your grave with you. Or keep as core holdings in your retirement portfolio. MCD and CMG are – again, any short-term noise aside – about as weatherproof from an economic standpoint as it gets. 

That said, everybody raves about privately-held In-N-Out and the 7th most searched name among fast food tickers in Trackstar, Shake Shack (SHAK), whose stock is up around 80% YTD. 

So we figured we’d quickly compare the two:

• Starting from smaller bases than McDonald’s and Chipotle, In-N-Out and Shake Shack both crush their fast food and QSR competitors. 
• In June 2023, visits to Shake Shack and In-N-Out were up 14.2% and 12.4%, respectively, year over year. 

The Bottom Line: While it has had an impressive run in 2023, we just don’t like Shake Shack – or other smaller fast food/QSR chains – in a world dominated by McDonald’s and Chipotle. While the latter dabbles here and there in related spaces, when you buy these stocks you’re pretty much buying McDonald’s and Chipotle straight away. Because investors will judge MCD and CMG on the basis of how McDonald’s and Chipotle perform. And, over the long-term, we’re confident to say they’ll both be strong and steady. 

Just as we don’t like smaller players, we’re not fans of big fast food conglomerates with multiple brands under their umbrellas. If you own Restaurant Brands International (QSR), you’re buying Burger King, Tim Hortons (eh!), Popeyes and Firehouse Subs. If you buy Yum! Brands (YUM), you’re buying KFC, Taco Bell, Pizza Hut, The Habit and more. There’s just too much room for error across so many different brands.

• Analysts Are Increasing Price Targets of These 10 Stocks
• Are Alternative Investments a gray area? The Alt can add some color
• Nouriel Roubini on Bitcoin and Other Predictions
• Check Out These Inflation And Other Financial Calculators