With Americans and the market souring on traditional fast food restaurants, diners and Wall Street have turned to a new segment of the restaurant sector: so called “fast casual” restaurants. These restaurants, as their name implies, attempt to serve casual restaurant quality food at quick-service speeds. However, these speeds do not approach the efficiency of fast food restaurants, nor do most of these restaurants have drive-thrus. The tradeoff — and the apparent driver behind this segment’s growth — is that these businesses generally provide a fresher, higher quality, more expensive product than do traditional fast food joints.
With the runaway success of Chipotle (CMG), other fast casual restaurants have been clamoring for consumers’ and investors’ dollars. Wall Street has been all too eager to respond, and a number of fast casual restaurants have been taken public in the past year in an attempt to cash in on the gold rush. Many of them are billing themselves as “the next Chipotle” — but we’ll evaluate those claims to see if any of these stocks warrant your investment.
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Photo Credit: Pamela Graham (Flickr)