Zacks Industry Outlook Highlights: Chipotle Mexican Grill, Jack in the Box, Domino's Pizza, BJ's Restaurants and Papa John's International
Zacks Equity Research
Updated
For Immediate Release
Chicago, IL – May 01, 2017 – Today, Zacks Equity Research discusses the Industry: Restaurants, Part 2, includingChipotle Mexican Grill, Inc. (NYSE: CMG – Free Report ), Jack in the Box Inc. (NASDAQ: JACK – Free Report ), Domino's Pizza, Inc. (NYSE: DPZ – Free Report ), BJ's Restaurants, Inc. (NASDAQ: BJRI – Free Report ) and Papa John's International Inc. (NASDAQ: PZZA – Free Report ).
According to the National Restaurant Association, 2017 could well be the eighth consecutive year of real sales growth in the industry. Amidst all the talk of a restaurant recession, strong sales and digital initiatives undertaken by restaurateurs to counter sluggish comps and traffic issues, along with improving economic indicators in the U.S., should bring some relief.
Taking the past trends and long-term growth prospects of the industry into account, we highlight a few positives of investing in the restaurant space:
Various Sales Building Strategies : In order to navigate in the challenging sales environment, restaurant operators are continually striving to add new items to their menu to cater to the ever-changing palates of customers while enhancing food presentation. Endeavors to augment sales by targeting higher footfall and improvising on the menu are thus bearing fruit. Some of the notable restaurateurs playing this card areChipotle Mexican Grill, Inc. (NYSE: CMG – Free Report ) and Jack in the Box Inc. (NASDAQ: JACK – Free Report ).
Another initiative undertaken by the food chains is re-imaging of stores, which has been received favorably by guests.Domino's Pizza, Inc. (NYSE: DPZ – Free Report ) has been working on these lines. Notably, reimaging of stores helps to create an appealing and differentiated concept that helps the brand connect better with guests, especially millennials.
Meanwhile, restaurant companies likeBJ's Restaurants, Inc. (NASDAQ: BJRI – Free Report ) offer loyalty programs at their outlets to enhance value dining. The companies engage guests through these programs with offers designed to increase frequency of visits. Loyalty programs thus help retain old diners while bringing in new ones, thereby driving traffic.
On the other hand, industry players like Brinker International and BJ's Restaurants are rolling out prototypes and smaller restaurant chains to augment value and drive traffic. This in turn will lower construction and occupancy costs but boost return on invested capital. Notably, smaller prototypes also accelerate growth in non-traditional locations.
Modern Technology, Digital Ordering & Other Channels Gain Precedence : The digital wave has hit the U.S. restaurant space as an increasing number of restaurateurs are deploying technology to enhance their guests’ collective experience. The companies’ online and digital marketing activities have thus increased significantly over the past several years in response to increasing use of online and mobile web technology.
While smartphone apps attract consumers, video menu boards in quick-service restaurants and tabletop devices speed up sales and ensure convenience. Further, restaurant operators rely on social media for promotions and incorporate online review sites and blogs aggressively into their marketing mix.
Domino's continues with its digital capabilities with the launch of various ordering apps and platforms. Particularly, its world-class digital ordering platforms like Facebook Messenger, Apple Watch and Amazon Echo should boost digital orders. The extended ways to order a pizza has in fact kept Domino’s in the forefront of digital ordering and customer convenience.Papa John's International Inc. (NASDAQ: PZZA – Free Report ) also aims to continue investing in technology focused on foundational improvements to its digital channels to increase order conversion rate, frequency and ticket average.
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