The restaurant industry could serve up a busy 2020, especially in terms of new trends, M&A deals, and new concepts gaining in popularity.
The restaurant industry could see a boom in "ghost kitchens" -- that is virtual kitchens with minimal to no physical presences, according to Restaurant Business. Since a "ghost kitchen" caters only to delivery or catering, it will allow restaurant owners the ability to test a new market or concept before committing large amounts of capital.
Another trend investors should be on the lookout for includes franchisees pushing for a bigger say at the table. Franchisees could start dictating more input on a brands' direction and even gain representation on the board of directors, according to RB.
Other potential trends include housemade plant-based food instead of "heavily processed" established brands, zero-alcohol bars, and a focus on less waste like single-use cups.
M&A Deals To Watch
The restaurant sector saw its fair share of M&A deals in 2019 although none were particularly large, according to RB. The last megadeal was in 2014 when Burger King and Tim Hortons were merged into Restaurant Brands International Inc (NYSE: QSR).
Looking forward to 2020 there could be one more potential notable deals, including Yum! Brands, Inc. (NYSE: YUM) buying Wendys Co (NASDAQ: WEN), according to RB. Yum Brands is at its core a brand operator and it has capacity to add new brands. Yum Brands has no exposure to the burger space and Wendys offers potential growth, especially internationally.
Yum Brands may also consider taking a look at Dunkin Brands Group Inc (NASDAQ: DNKN). Under Yum's umbrella, Dunkin could fast track its intentional expansion, especially in China where coffee is gaining in popularity.
Finally, Subway could fit in well in Restaurant Brands' umbrella. Similar to Burger King in 2010, the sandwich chain is undergoing similar struggles in terms of poor sales and an angry franchisee base.
"And though it appears like it will be a challenge to turn that brand around, it's no more of a challenge than Burger King was a decade ago," RB wrote.
Multiple legacy restaurants are looking to gain share through leveraging their brand power with a completely new concept. Dine Brands Global In (NYSE: DIN), the owner of IHOP, will launch fast-casual restaurant called Flip'd in Atlanta. Unlike traditional IHOP locations, Flip'd will heavily focus on off-premise orders, catering, ready-to-eat salads and more, according to RB.
Texas Roadhouse Inc (NASDAQ: TXRH) wants to be known for more than steaks and will continue expanding its fast-casual sandwich chain called Jaggers. The restaurant offers mostly chicken sandwiches and burgers and will open two new locations in 2020.