3 Restaurants With Tasty Potential

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

The restaurant industry is notoriously tough and competitive, but it can also be a very lucrative business for well run companies delivering the right menu for their customers. These three restaurants can add a touch of growth flavor to your portfolio.

Hot and spicy
Chipotle Mexican Grill (NYSE: CMG  ) has been one of the most remarkable success stories in the restaurant business over the last years. The fast casual category, which offers higher quality food and atmosphere for a few extra bucks in comparison to traditional fast food, is a booming niche, and Chipotle is an undisputed leader in that segment.

The company´s "food with integrity" approach to tacos and burritos may create operational complexities and higher costs, but customers seem to really appreciate the cultural footprint and the high quality ingredients that come with it. Chipotle has compounded sales growth at more than 20% annually over the last five years, and earnings per share have increased at more than 32.6%  per year during the same period.

Even if growth has understandably slowed down as the company becomes bigger, this hot Mexican restaurant is still delivering spicy results. Revenue grew by 18% in the last quarter fueled by a 6.2% increase in comparable restaurant sales, and earnings per share increased by 17.2% versus the same quarter in the previous year.

Chipotle opened 37 new restaurants during the quarter, bringing the total to 1,539 locations, and management expects to open between 180 and 195 restaurants in 2014. Considering demand strength, the company still has a lot of room for expansion, both in the U.S. and abroad.

Quality pizza
Everybody loves pizza, especially when it comes with the kind of high-quality toppings and ingredients that Papa John's (NASDAQ: PZZA  ) uses on its products. Chairman and CEO John H. Schnatter founded Papa John´s in 1985 and from a single location in Mexico City he has led the company to becoming a global corporation with more than 4,300 restaurants, 1,045 of which are located outside of North America.

Schnatter is always willing to put his name and reputation behind the company´s products, and he is quite vocal about the importance of high-quality ingredients like high protein unbleached flour and fresh-packed sauce when it comes to delivering superior and unique products.

The company has earned the top spot in customer satisfaction among national pizza chains in  the American Customer Satisfaction Index (ACSI) survey in 12 of the last 14 years, so clients seem to agree with Schnatter about the importance of a dedicated focus on quality.

Papa John´s delivered a 9% increase in revenues for the second quarter, with comparable sales increasing by 3.4% in North America and 6.8% in international markets. International expansion is a key growth area for the company, and customer response is signaling that Papa John´s is moving in the right direction by focusing on global growth.

Simple and effective
Buffalo Wild Wings
(NASDAQ: BWLD  ) offers a simple and effective proposition to its customers: tasty chicken wings, plenty of beer options and widely available TVs to watch sports. This doesn´t sound too sophisticated, but business has been booming over the last years.

The company has increased sales at a 25.8% annually and earnings per share at 22.7% per year during the last five years. And there is no slowdown in sight; Buffalo Wild Wings reported a big increase of 27.8% in revenue during the second quarter, while earnings per share grew at an impressive 41.9% versus the previous year. Same-store sales increased 3.8% at company-owned restaurants and 4.1% at franchised restaurants during the quarter.

The company is implementing a series of initiatives to improve customer experience, Buffalo Wild Wings has recently created the position of "guest experience captain," these captains are responsible for engaging customers with the company´s programs, promotions and technology. Buffalo Wild Wings has also entered into an agreement with DirecTV to carry every game the satellite TV company has available, so if your favorite team is playing, chances are you will be able to watch the game at Buffalo Wild Wings.

Buffalo Wild Wings currently has 951 restaurants, nearly 56% of the potential market opportunity which management estimates to be around 1,700 restaurants in the U.S. and Canada. Buffalo Wild Wings is also expanding into other areas; the company made a minority interest investment in PizzaRev, a fast casual pizza concept based in Los Angeles, and is planning to open the first company-owned PizzaRev in the Minneapolis area in early 2014.

Bottom line
Chipotle Mexican Grill, Papa John´s and Buffalo Wild Wings have proven business modes with plenty of room for expansion over years to come. As long as management continues executing as expected, these restaurants can add some mouth-watering growth opportunities for your portfolio.

Even more growth opportunities
Chipotle, Papa John's and Buffalo Wild Wings aren't the only growth stocks out there. Motley Fool co-founder David Gardner, founder of the No. 1 growth stock newsletter in the world, has developed a unique strategy for uncovering truly wealth-changing stock picks. And he wants to share it, along with a few of his favorite growth stock superstars, WITH YOU! It's a special 100% FREE report called "6 Picks for Ultimate Growth." So stop settling for index-hugging gains... and click HERE for instant access to a whole new game plan of stock picks to help power your portfolio.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2695753, ~/Articles/ArticleHandler.aspx, 9/28/2016 1:31:59 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 4 hours ago Sponsored by:
DOW 18,228.30 133.47 0.74%
S&P 500 2,159.93 13.83 0.64%
NASD 5,305.71 48.22 0.92%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/27/2016 4:00 PM
BWLD $149.69 Down -2.57 -1.69%
Buffalo Wild Wings CAPS Rating: ****
CMG $418.95 Down -0.93 -0.22%
Chipotle Mexican G… CAPS Rating: ****
PZZA $81.61 Down -0.02 -0.02%
Papa John's Intern… CAPS Rating: ****