Panera Is a Top Ch-Ch-Chain

Panera (Nasdaq: PNRA  ) achieved what might be considered a PR triumph -- it received some interesting top rankings in a first-time fast-food survey conducted by well-known leisure content reviewer Zagat in conjunction with The Today Show. This may provide food for thought about many restaurant chains, but doesn't necessarily indicate the greatest investments in the fast-food industry.

The Zagat survey revealed some very intriguing findings. For example, among "fast-food mega-chains," Wendy's (NYSE: WEN  ) stole the show, ranking number one in the Most Popular, Top Food, and Top Facilities categories.

Of course, given what investors have observed in the sector, there seems to be a bit of a disconnect. McDonald's (NYSE: MCD  ) springs to mind as the fast-food chain that has really been firing on all cylinders lately. Wendy's stock may be on the upward trajectory, but a lot of that has been fueled by buyout rumors. You could argue it's looking pretty expensive at the moment, trading at 24 times forward earnings despite little indication that impressive growth is on the way. (When longtime Fool Rick Munarriz recently covered Wendy's buy-out rumors, he pointed out the chain has been closing more restaurants than it's opened.)

Most interesting is that on a larger scale, Panera rocked several categories. When it comes to "overall fast-food chains," it won the Most Popular, Top Food, and Top Facilities categories.

There are lots of things to like about Panera's positioning; some people have been known to wonder if Panera has branding power reminiscent of Starbucks' (Nasdaq: SBUX  ) magic. Plus, Panera has put a lot of focus on healthy menu options, and the fresh-baked bread angle is a nice one indeed. It certainly isn't difficult to imagine that as the public becomes more aware of health issues -- not to mention the current attention to the expanding American waistline -- customers' tendency to choose a restaurant like Panera over the typical fast-food joint might grow. There's something to be said for "fast" without the "fat," and despite adding healthier menu options, the burger slingers still struggle with the reputation for greasy, ultra-fattening foods.

Of course, Panera hasn't had an entirely smooth ride here lately, either. Panera's most recent quarter was a bit downbeat. It has its work cut out for it in terms of differentiating itself as well as one of its current goals, to lure more lunchtime customers. The lunch crowd is an important element in shoring up this company's ongoing success and ensuring it's not just loafing around.

Getting such excellent rankings in the Zagat survey certainly does provide nosh-worthy tidbits for investors' brains, but of course, it's not the whole story. Trading at 21 times next year's earnings, which are expected to rise by 23%, doesn't insinuate that Panera is a raging buy at the moment. Then again, the stock merits a watchful eye in the coming year.

Starbucks is a Motley Fool Stock Advisor recommendation. To find out what other companies David and Tom Gardner have recommended to subscribers, click here for a 30-day free trial.      

Alyce Lomax owns shares of Starbucks. The Fool's disclosure policy always rises.


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