Fast casual restaurants have truly been a revolution in the food industry positioning themselves as the high quality middle-ground between fast food and full-service restaurants. Fast food restaurants are going strong as well touting strong overall value and low everyday prices while sophisticating their ambiance and menus.

With over 1,000 locations Chipotle Mexican Grill (NYSE:CMG) is truly the stalwart of the fast casual industry while McDonald’s (NYSE:MCD) rules the fast food industry being the single largest fast food chain in the world. Let’s see if these giants offer an opportunity for the investors to participate in their success.

Chipotle Mexican Grill’s growth is nowhere near a halt…

Chipotle Mexican Grill has been an incredibly successful company serving food for 20 years now and serving investors since 2006. The company’s sales have grown from $1.1 billion in 2007 to $2.7 billion in 2012 while the earnings have more than quadrupled from $2.15 to $8.75 in the same period.

The second quarter for fiscal 2013 was another winner for the company, revenue increasing 18% year on year to $817 million and EPS growing 10% to $2.82. The amazing thing is revenue spike came in with the help of same-stores sales growth of 5.5% and management expects the same stores sales growth to be from low to mid single digit for 2013. On the other hand, Panera Bread (NASDAQ:PNRA), another leader in the fast casual space, didn’t have an impressive quarter. Revenue came in at $589 million versus analyst expectation of $596 million and EPS came in at $1.74 versus analyst expectation of $1.77. Same store growth rate at company owned cafes was 3.7% versus management expectations of 4%-5%. Management now lowered the EPS estimate for fiscal 2013 to a range $6.75 to $6.85, down from a previously guided range of $6.91 to $7.03. 

Chipotle Mexican Grill plans to open 165-180 new restaurants this year of which 92 have already started serving food. Thus Chipotle seems to go full throttle on the expansion front which is good news for investors as it is a highly successful brand and new stores are most probably going to increase profits. Panera Bread plans to open 115 new stores this year, a little less than the 123 new stores opened last year.

Chipotle Mexican Grill came out with A-Model stores which are located in secondary trade areas with low levels of occupancy cost but great brand awareness. So these are less expensive to set up but bring decent revenue at the same time yield a generous return on investment. To diversify its product offerings and hence find new customers, the company now serves South-East Asian cuisine through its ShopHouse restaurant in Washington, DC, the response to which has been so warming that four new restaurants are planned to open by mid 2014. Thus this venture could open a whole new line of growth opportunity.

Chipotle Mexican Grill is different from other food chains in the sense that it uses fresh ingredients for its food bought from high quality providers of natural and environmentally sustainable food. This makes its food pricier but the increasing health conscious population is ready to pay that extra buck for healthier food options. And last but not the least, the company has come out with new meals to attract vegans and tofu based items to serve the calorie and nutrient conscious customer. Even Panera Bread came out with a new pasta menu, shrimps and salads to attract customers at dinner time, its least performing time zone.

Thus, with a consistent track record of performance, full speed expansion, premium brand image, diverse product offerings, Chipotle Mexican Grill is a great candidate for you portfolio.

McDonald’s tried, tested and highly successful business model makes it a safe investment…

Moving aside from the high growth stocks mentioned above, McDonald’s is more of a value play at present after years of dominance in the fast food industry boasting an incredible performance in the past decade and a half.

The company has increased earnings a whopping 293% since 1999 and a 23% annual dividend increase over the same period today paying a fat 3.20% yield. With over 34,000 stores worldwide the brand enjoys high scale advantage resulting in a very healthy operating profit margin of over 30%. The company’s consistency is also reflected from that fact that from 1998-2012, McDonald’s has grown ROA from 7.8% in 1998 to 15.4% in 2012 at a CAGR of 4.97%, ROE from 16.4% to 35.7% at a CAGR of 5.73% and ROI from 9.9% to 18.9% at a CAGR of 4.75%.

Analysts at Zacks estimate the company to grow earnings at a rate of 9.2% over the next five years which means earnings should cross the $8 mark. At present McDonald’s trades at a P/E of 17.63 which below its 10 year average P/E ratio of 18.92. The company still has $8.4 billion of the $10 billion buy-back program left which should further improve the distributable profits.

Granted that McDonald’s might not see the growth it had ten years ago but there are still parts of the world which have not yet witnessed the McDonald’s mania. India for instance has 250 stores currently which the company plans to double by 2014. With 1,700 locations in China, it plans to take that number to 2000 by 2014. Management plans to spend $3.2 billion this year to open around 1500-1600 new stores this year.

It also increasing its product offerings; besides its successful “Dollar Menu”, McDonald’s introduced Chicken McWraps, Egg McMuffins, Chicken McNuggets etc to attract more customers.

Thus with the excellent financial history, attractive dividend, steady expansion, excellent buy-back program and positive growth estimates, I think McDonald’s is a sensible buy.

Chetan Valani has no position in any stocks mentioned. The Motley Fool recommends Chipotle Mexican Grill, McDonald's, and Panera Bread. The Motley Fool owns shares of Chipotle Mexican Grill, MCD, and Panera Bread. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!