An increase in consumer confidence could improve the performance of casual-dining restaurants over quick-service chains.
There are already signs that consumers are willing to spend more this holiday season. In a recent article by CNBC, Matthew DiFrisco, a Guggenheim analyst, describes how this improved consumer confidence should have investors leaning towards casual-dining over quick-service dining stocks.
Quick-service burger chains will see the effects of increased gas prices and rising interest rates, which will hurt same-store sales and franchise investment. Franchisees will find it harder to get loans with the higher interest rates and quick-service brands such as McDonald's and Wendy's have 80 percent of their locations franchised.
"[Same-store sales] catalysts more specific to quick service restaurants appear to be decelerating and both brands shares already reflect the successful execution of their strategic restructuring programs," DiFrisco wrote.
On the other hand, the casual-dining sector may not be as harshly affected. With a moderate increase in consumer confidence, casual restaurants are likely to see improvements in same-store sales.
DiFrisco sees delivery as an opportunity for the casual dining space. Close to 25 percent of delivery orders are placed online and online transactions often leads to larger checks. Delivery service providers or operators that offer delivery could stand to benefit from this trend.
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