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Restaurant Analyst Says Delivery, Pickup Separate Winners From Losers

The one defining characteristic separating winners from losers in the restaurant space is delivery and pickup options, Piper Sandler restaurant analyst Nicole Miller Regan said on CNBC's "Power Lunch."

Benzinga · 05/21/2020 15:19

The one defining characteristic separating winners from losers in the restaurant space is delivery and pickup options, Piper Sandler restaurant analyst Nicole Miller Regan said on CNBC's "Power Lunch."

'Investible Theme' For Restaurants

While delivery and pickup options are vital to a restaurant's survival, more important are unit-level economics that makes sense and the ability to deliver across multiple channels, Miller Regan said. Most notable is the ability to offer a digital ordering platform with embedded delivery options, she said. 

"That's a very investible theme."  

Dine-In Restaurant Chains

High-end dine-in restaurants are closely correlated with corporate spend and will see a much slower rebound versus more leisure-oriented brands, the analyst said.

Encouragingly, leisure brands count their dining rooms for their "base margins" and any pick-up orders to go bring superior margins, she said. 

This is countered by a delivery that is dilutive to margins, but so long as pick-up orders match delivery orders, the company will end up with an unchanged margins profile, Miller Regan said.

Piper Sandler Analyst's Top Restaurant Picks

Companies that Miller Regan recommend include top pick Chipotle Mexican Grill, Inc. (NYSE: CMG) as the chain exits its recovery phase and is set to expand digital growth and unit expansion.

Second-ranked Wingstop Inc (NASDAQ: WING) is an "excellent franchise network" that faces a large whitspace opportunity ahead, the analyst said.

Ranked third is Darden Restaurants, Inc. (NYSE: DRI) due to its "scale and people." The management team consists of "the best of the best of the best," which will ensure its core brands of Olive Garden and Longhorn will "be here in the future," she said. 

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Photo courtesy of Uber.