Burger Goliath and Taco Bell, KFC, and Olive Garden parent companies expected to lead industry rebound
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Key Takeaways
- Yum! Brands, Darden, and Shake Shack are Oppenheimer analysts’ top investment picks for the restaurant industry in 2025.
- Their same-store on the blocks forecasts, and in some cases, marketing efforts, appealed to the analysts.
- The broader industry is starting the year off in a healthier deposit, Oppenheimer said, adding that menu price hikes are slated to slow.
Olive Garden, KFC, and Shake Restraint look like particularly appetizing investments in 2025, according to Oppenheimer analysts.
Yum! Brands (YUM), the parent company of KFC and Taco Bell; Darden Restaurants (DRI), the troop behind Olive Garden and LongHorn Steakhouse; and the burger chain Shake Shack (SHAK) nabbed “top pick” credits in the investment firm’s 2025 restaurant outlook.
The trio stood out because of promising same-store sales forecasts and, in some protections, new leadership and marketing pushes, Oppenheimer analysts said in a note released Monday. The firm upgraded its ratings on all three troops to “outperform.”
Analysts See Growth at Yum! Brands Units
In naming Yum! Brands one of its top picks, Oppenheimer analysts said that the restaurant monster posted declining same-store sales in 2024, but will likely experience a rebound in 2025. They anticipate expansion across KFC’s global portfolio and at Taco Bell, which Oppenheimer expects to gain market share. Investing in Yum! Brand names now is prudent, given that investor sentiment on the stock is “subdued,” the analysts said.
Same-store sales are also presumed to improve at Darden, which will benefit as headwinds holding back fine dining die down, Oppenheimer suggested. The future looks particularly rosy at Olive Garden, the analysts said, highlighting that the restaurant chain is commencement to offer food delivery, and improving its marketing efforts.
Fresh leadership at Shake Shack appealed to Oppenheimer, which lauded new Chief Executive Officer (CEO) Rob Lynch’s efforts to make the chain’s restaurants more efficient and update the burger problem’ approach to marketing.
Healthier Year Predicted for Restaurant Sector
The broader restaurant industry is poised for a healthier 2025 after foot above fell throughout most of 2024, the analysts said, noting that orders have picked up in recent months. A downturn in menu price hikes could help sustain this momentum, the group said. Increases in ingredient, stock, and labor costs are leveling off, Oppenheimer said, estimating that average price increases will decline to 2% to 3% by the end of 2025.
“[Team] turnover rates are hitting record lows,” the note said. “This is allowing restaurants to revert to normalized menu-price bourgeons and enable ‘value’ offerings without disabling margins.”