Industry Description
The Zacks Retail-Restaurants industry comprises several owners and operators of casual, upscale casual, fine dining, full-service and fast-casual restaurants. Some industry participants operate as roasters, marketers and retailers of specialty coffee. Some companies develop, operate and franchise quick-service restaurants worldwide. A few restaurant operators offer cooked-to-order dishes, including noodles and pasta, soups, salads and appetizers. Some industry players develop, own, operate, manage and license restaurants and lounges worldwide. A few companies also run technology-enabled Japanese restaurants in the United States and provide Japanese cuisine through a revolving sushi service model.
4 Trends Shaping the Future of the Restaurant Industry
Challenging Consumer Environment: The restaurant industry continues to operate in a difficult macroeconomic backdrop. Elevated menu prices and cautious consumer spending have kept guest traffic under pressure as many diners look for better value. At the same time, rising labor, food and occupancy costs, along with increased spending on marketing and store development, are weighing on restaurant profitability. Intense competition is also forcing operators to invest more heavily in promotions and customer engagement.
2026 U.S. Restaurant Industry Outlook: According to the National Restaurant Association, U.S. restaurant and foodservice sales are projected to reach about $1.55 trillion in 2026, with modest real sales growth. While consumers continue to value dining out and convenience, operators are expected to face uneven traffic, persistent cost inflation and cautious household spending. Industry growth is likely to be supported more by pricing, menu mix and operational efficiency than by a broad-based recovery in customer visits.
Convenience and Digital Innovation Fuel Demand: Convenience remains a key driver of growth across the restaurant industry. Consumers continue to favor drive-thru, takeout and delivery options, prompting brands to expand their digital capabilities. Investments in mobile ordering, loyalty programs and AI-enabled technologies are helping restaurants improve operational efficiency, personalize customer engagement and encourage repeat purchases.
Expansion and Menu Strategy Support Revenues: Restaurant companies are pursuing growth through new restaurant openings, smaller-format locations and expansion into underserved markets. Many operators are also refining menu and pricing strategies by introducing premium offerings, value bundles and limited-time promotions to boost average ticket sizes. These initiatives are helping sustain revenue growth despite a slower recovery in overall guest traffic.
The Zacks Industry Rank Indicates Dull Prospects
The Zacks Restaurant industry is grouped within the broader Retail-Wholesale sector. The industry carries a Zacks Industry Rank of #181, placing it in the bottom 27% of more than 247 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates dull near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
The industry’s position in the bottom 50% of the Zacks-ranked industries results from a negative earnings outlook for the constituent companies in aggregate. Before we present a few stocks that you may want to consider for your portfolio, let us take a look at the industry’s recent stock-market performance and valuation picture.
Industry Underperforms the S&P 500 and the Sector
The Zacks Retail-Restaurants industry has underperformed the Zacks S&P 500 composite and its sector over the past year.
Over this period, the industry has declined 8% against the Zacks S&P 500 composite’s rise of 22.8%. The sector has increased 2.2% in the same period.
1-Year Price Performance
Restaurant Industry's Valuation
Based on the forward 12-month P/E, a commonly used multiple for valuing restaurant stocks, the industry is currently trading at 22.81X compared with the S&P 500’s 21.03X. It is down from the sector’s forward 12-month P/E ratio of 25.05X.
Over the past five years, the industry traded as high as 29.01X and as low as 22.08X, the median being 24.85X.
P/E (F12M)
4 Key Restaurant Picks
Dutch Bros: The company is benefiting from healthy traffic trends, supported by strong customer loyalty and increasing digital engagement. Dutch Bros continues to expand its store base in a disciplined manner, backed by attractive unit-level economics.
Shares of this Zacks Rank #2 (Buy) company have gained 6.4% in the past six months. BROS’ 2026 sales and earnings are anticipated to rise 27.1% and 22.4%, respectively, year over year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: BROS
Brinker International: The company is benefiting from strong traffic at Chili’s, marketing initiatives and a value-driven menu strategy. Also, the emphasis on technology initiatives, expansion and store upgrades bodes well.
Shares of this Zacks Rank #2 company have gained 7.7% in the past six months. EAT’s fiscal 2026 sales and earnings are anticipated to rise 7.9% and 20.8%, respectively, year over year.
Price and Consensus: EAT
BJ's Restaurants: The company continues to benefit from sustained traffic growth, menu innovation and operational initiatives. Fiscal first-quarter 2026 comparable sales growth was driven primarily by higher guest traffic, while restaurant-level margins remained stable despite elevated commodity and workers’ compensation costs.
Shares of this Zacks Rank #2 company have gained 33.6% in the past six months. BJRI’s 2026 sales and earnings are anticipated to rise 2.7% and decline 2.2%, respectively, year over year.
Price and Consensus: BJRI
Arcos Dorados: The company is benefiting from healthy comparable sales growth, supported by rising digital engagement, a growing loyalty platform and resilient guest traffic. Continued restaurant expansion, operational efficiency initiatives and a focus on value offerings position Arcos Dorados for sustainable long-term growth.
Shares of this Zacks Rank #2 company have gained 5% in the past six months. ARCO’s 2026 sales and earnings are anticipated to rise 10% and 180.8%, respectively, year over year.
Price and Consensus: ARCO
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Dutch Bros Inc. (BROS): Free Stock Analysis Report
BJ's Restaurants, Inc. (BJRI): Free Stock Analysis Report
Brinker International, Inc. (EAT): Free Stock Analysis Report
Arcos Dorados Holdings Inc. (ARCO): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).