Restaurant Brands International (QSR -0.98%) owns some iconic fast-food chains, including Burger King, Tim Hortons, and Popeyes. They've been generating some impressive same-store sales numbers in recent quarters, making the company a potentially excellent investment even amid unfavorable macroeconomic conditions. But how do these restaurants compare to McDonald's (MCD -0.05%), which has also been delivering some strong sales growth of its own?
Comparable sales among top chains have been strong
A key metric for restaurants is comparable-store sales (comps), which shows how much revenue has risen at restaurants that were already open a year ago. This excludes any gains that a chain would have benefited from simply by opening up new locations, and it gives a better indicator of the level of growth its restaurants are generating.
Here's how top restaurant chains Tim Hortons, Burger King, and McDonald's have been doing in the past few years in terms of comps:
Source: Company filings. Chart by author.
Restaurant Brands' top two chains, Burger King and Tim Hortons, have been right up there with McDonald's, at times even outperforming the golden arches. During the first three months of 2023, Tim Hortons, the iconic Canadian coffee chain, reported impressive 13.8% comps growth.
Overall revenue growth has also been stronger for Restaurant Brands
The two companies have followed similar patterns, since their success depends heavily on the economy and consumer spending. Restaurant Brands acquired Firehouse Subs in 2021, and it generally has more room for expansion with approximately 30,000 locations across all of its restaurant brands, while McDonald's is at more than 38,000 all on its own. That gives Restaurant Brands more room to expand and potentially build on its already stronger growth rate.
QSR revenue (quarterly YoY growth), data by YCharts. YoY = year over year.
McDonald's runs the more profitable business
The one big advantage for McDonald's, however, is that the company generates better profit margins than Restaurant Brands, typically around 30% of revenue.
QSR profit margin (quarterly) data by YCharts.
With better margins, the company arguably doesn't need as much growth as Restaurant Brands in order to grow its bottom line. Both companies rely heavily on franchising, but McDonald's still performs better as it benefits from having a strong brand and loyal customer base.
Which stock offers better value?
For investors, a key consideration is also the price-to-earnings (P/E) ratio that a stock trades at, as that puts into context how much premium investors are willing to pay for the business. At nearly 32 times earnings, McDonald's is the more expensive stock of the two, and that has normally been the case in recent years:
QSR PE ratio data by YCharts.
Which stock should investors buy?
Both stocks make for intriguing investments right now as both have been performing well amid inflation and could be good options for investors looking for some safety. Restaurant Brands offers a 3% dividend yield while McDonald's stock pays 2%. It's hard to go wrong with either food stock, as they are both performing well and could make for excellent long-term investments.
From a value and growth-potential perspective, however, I would give Restaurant Brands the edge as the stock could provide investors with more upside.
