Zacks Industry Outlook Highlights: Darden Restaurants, Yum! Brands, Restaurant Brands, Domino's And Papa John's

For Immediate Release

Chicago, IL – November 29, 2017 – Today, Zacks Equity Research discusses the Restaurants, including Darden Restaurants, Inc. (NYSE:DRI) , Yum! Brands, Inc. (NYSE:YUM) , Restaurant Brands (NYSE:QSR) , Domino's (NYSE:DPZ) and Papa John's International Inc. (NASDAQ:PZZA) .

Industry: Restaurants, Part 2

Link: https://www.zacks.com/commentary/138726/will-digital-efforts-delivery-aid-a-recovery-in-restaurants

Given the exponential rise in costs, companies are striving to keep expenses under control. Along with several conscious attempts, commodity cost deflation is helping Cracker Barrel to make solid progress in reaching its cost-reduction targets.

Additionally, these initiatives are expected to aid the company in combating some of the wage inflation pressures. Darden Restaurants, Inc. is also focusing on an aggressive cost management plan, under which it has been able to significantly cut operating costs.

Of late, various companies in the restaurants space like Yum! Brands, Inc., Restaurant Brands, Domino's and others have adopted a de-risking strategy by reducing their ownership of restaurants through refranchising. Notably, refranchising a large portion of the system reduces the company’s capital requirements and facilitates earnings per share growth and ROE expansion.

In addition, free cash flow continues to grow, thus allowing reinvestment for increasing brand recognition and shareholder returns. Moreover, since a major portion of their business is re-franchised, these companies are less affected by food inflation than their peers.

Increased Focus on Modern Technology, Digital Ordering: In this digital era, as consumers increasingly look for convenience, technology has started to play an important role in determining customer experience. This digital wave has hit the U.S. restaurant space too, as an increasing number of chains are deploying technology to enhance guest experience.

In fact, technology at restaurants has become essential — more than ever before — given the troubles plaguing this space over the past few quarters. Hence, restaurant operators are comping up all guns blazing, with their online and digital marketing activities, to meet consumers’ increasing dependence on and penchant for online and mobile web technology and consequently lure them back.

While smartphone apps attract consumers, video menu boards in quick-service restaurants and tabletop devices speed up sales and ensure convenience. Further, restaurant operators rely on social media for promotions and incorporate Facebook (NASDAQ:FB), online review sites, Twitter and blogs aggressively into their marketing mix.

In fact, mobile ordering in particular is fast becoming a crucial part of many restaurants' plans, given what it can bring in enhanced sales. This is because when using a phone to order their food, customers, on average, tend to spend more and visit more often. Going forward, mobile ordering will form the crux of customer’s experience, rather than just being a point of differentiation.

Notably, pizza giants Domino's and Papa John's International Inc. have been the industry bellwethers in the digital ordering space. Domino’s continues adding to its digital capabilities with the launch of various ordering apps and platforms. The extended ways to order a pizza has thus kept this company in the forefront of digital ordering and customer convenience.

Papa John’s aims to continue making investments in technology focused on foundational improvements to their digital channels to increase order conversion rate, frequency and ticket average. Further, in 2018, Papa John’s aims to completely redesign its digital platform and solutions capabilities, leveraging enhanced data analytics and insights to ensure that its industry-leading platforms are sustainable, efficient and effective.

Though a few restaurants have managed to come along as far as the pizza chains, there are still many who have advanced their own apps by leaps and bounds to attract more customers on the go.

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