Investing in Fast-Food Stocks

The granddaddy of the fast-food industry, McDonald's has been serving its iconic burgers and fries since 1955. The company's ethos centers on consistency and value. You know what you're going to get with McDonald's, and you know you won't pay too much.

McDonald's is experiencing struggles in its U.S. market, with declines in same-store sales and a drop in revenue. While the company is still growing globally and remains the largest fast-food chain, consumers are being more selective with their spending, and some are pulling back on eating out due to inflation and economic concerns.

McDonald's is focusing on digital, delivery, and drive-thru to boost sales higher in the coming years. Through its mobile app, loyalty program, and partnerships with third-party delivery companies, McDonald's aims to be a leader in delivery while making the ordering process as easy as possible for its customers.

While almost every restaurant was forced to embrace delivery to stay afloat several years ago during the COVID-19 pandemic, Domino's already had its own delivery infrastructure in place. By avoiding third-party delivery companies, the pizza chain maintained control over the customer experience and kept costs down.

Domino's has since embraced third-party delivery apps while maintaining its own delivery infrastructure. Domino's reported a 2.5% increase in revenues for the first quarter of 2025, primarily due to higher U.S. franchise advertising revenues, higher supply chain revenues, and higher international franchise royalties and fees.

U.S. company-owned store gross margins fell to 16% from 17.5% a year ago, affected by rising food prices. Meanwhile, international same-store sales saw a strong 3.7% increase. Net income totaled $149.7 million, up almost 19% on a year-over-year basis.

Pizza chain Papa John's has long played second fiddle to the larger Domino's. Controversy over statements made by founder and former CEO John Schnatter a few years ago hurt the brand, leading to his ouster and an ongoing feud.

Total revenues for 2024 were down 3.6% compared to the previous year. Global system-wide restaurant sales also decreased by 3.1%. While the first quarter of 2025 saw a slight increase in total revenue, North America comparable sales still declined by 3%.

The company has been actively reinvesting savings into initiatives aimed at improving value perception among consumers, which may be affecting short-term operating margins. Papa John's is facing challenges in the competitive pizza market, with declining sales and a need to regain customer loyalty.

While growth has slowed somewhat, the company's smaller size and vast potential for restaurant growth make it an interesting fast-food stock to consider.

With its KFC, Taco Bell, Pizza Hut, and Habit Burger Grill brands, there are more than 61,000 restaurants operating globally under Yum! Brands' portfolio. Like Restaurant Brands International, Yum! covers multiple categories.

Yum! is opening new locations across all its brands at a healthy pace, and sales are soaring at existing restaurants. With Yum!, you get multiple leading brands in KFC and Taco Bell, a pizza chain that has room to gain ground on market leader Domino's, and a small burger chain that has plenty of room to grow.

Yum! is already one of the biggest players in the fast food industry, but it still has significant long-term growth potential. Yum! Brands is experiencing a period of growth and innovation, particularly in its digital operations. While some areas like Pizza Hut's U.S. sales have seen lower-than-expected growth, overall, Yum! is focusing on digital sales, technology integration, and expanding its presence internationally.

You may not think of coffee chain Starbucks as fast food, but its quick service of drinks and snacks, along with its drive-thrus in many locations, certainly puts it in the same category as more traditional fast-food companies. Starbucks is a bit different from other fast-food chains because it doesn't franchise. Aside from some licensed locations, Starbucks operates its own stores. Even with its capital-heavy model, Starbucks has managed to open around 40,000 locations worldwide.

The pandemic was bad news for Starbucks due to its dependence on commuters. Other challenges have persisted in recent years and driven fluctuations in revenue growth as well as profits. Increased competition in key markets like China, pricing issues as consumers increasingly push back against costly discretionary expenditures and shifts in the macro environment have all been factors that have affected the top and bottom lines.

In August 2024, Starbucks announced that CEO Laxman Narasimhan would be departing the company effective immediately, to be replaced by Chipotle's (NYSE:CMG) long-time CEO Brian Niccol the following month. Starbucks has gone through numerous leadership changes in recent years, but its new, renewed vision for growth could spur the business toward a brighter future.

While competition for away-from-home coffee is intense, the iconic Starbucks brand and unrivaled store footprint give it an advantage over other chains as well as local competitors.

Consumers will always crave quick service, low prices, and constant menu innovation. The fast-food industry delivers in more ways than one.

Fast-food restaurants can leverage the investments they made in digital and delivery over the last few years to drive growth for years to come. Now, the bigger threat to companies with exposure to discretionary spending stems from a challenging economic environment that is curtailing consumer spending.

However, because many fast-food chains focus on offering great value, a tough economic environment can pose fewer risks for well-run businesses. If you're interested in investing in the fast-food industry, here are seven top stocks to consider:

Restaurant Brands added to its portfolio with the acquisition of Firehouse Subs in late 2021. Firehouse Subs is Restaurant Brands' smallest chain, but it could easily expand the brand to many thousands of locations over time. Burger King, Tim Hortons, and Popeyes round out the Restaurant Brands stable of restaurant chains, which span burgers and fries, coffee and breakfast, fried chicken, and sandwiches.

Despite challenges in North America, the company's international business, particularly in Tim Hortons and Popeyes, continues to show strong growth and profitability. Restaurant Brands is focused on increasing franchise profitability, particularly in Burger King's U.S. business, and is investing in store renovations, acquisitions, and new menu items. The company remains optimistic about the future, expecting to expand adjusted operating income by at least 8% in 2025 and beyond.

7. Starbucks

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Seven top fast-food stocks in 2025