CNBC Television
There are fast food companies insulated from the weakening consumer: Guggenheim's Greg Francfort
11/5/2025, 6:56:25 PM
Economic Summary
- Lower-income households (sub-$45k) have been pressured for 18–24 months, and that weakness has spread into the $45k–$100k segment, which represents ~30% of Chipotle's (CMG) business, creating meaningful top-line risk for chains exposed to that demo.
- Several quick-service/fast-food concepts are resilient: Taco Bell (YUM) comps ~+7%, McDonald's (MCD) comps +2–3%, Domino's (DPZ) comps +5%, suggesting value-oriented or franchised formats are insulated versus company-operated fast casual.
- Restaurant equities have materially underperformed broader market leadership; many company-operated fast-casual chains are down 40–60%, while global franchisors trade modestly better, reflecting top-line and multiple compression risk across the sector.
- Labor/operating dynamics: this is among the loosest restaurant hiring markets in a decade—turnover is down and hiring easier—so wage growth for many restaurant workers may moderate, which could be a margin tailwind for big chains like Starbucks (SBUX) if sustained.
- Texas Roadhouse (TXRH) is highlighted as a high-conviction idea: shares near $160, expected strong top/bottom-line growth and implied <18x 2027 earnings under a 17% recovery margin scenario.
Bullish
- Taco Bell, McDonald's, and Domino's showing comp resilience.
- Easier hiring and slowing wage growth could boost restaurant margins.
- Texas Roadhouse trades at an attractive valuation versus expected 2027 recovery.
Bearish
- Lower-income consumers under pressure, hurting traffic for value-dependent chains like Chipotle.
- Company-operated fast-casual chains have seen steep share declines and top-line pressure.
- Starbucks faces earnings pressure from labor reinvestment despite a premium valuation.
Bullish tickers
YUMMCDDPZTXRH
Bearish tickers
CMGSBUX
CMG
Bearish
Lower-income customers (<$45k) pressured for 18–24 months; weakness spreading into the $45k–$100k segment, which is ~30% of Chipotle's business and hurting comps.
SBUX
Bullish
Comps and traffic have gone positive; easing wage growth could improve margins if trends continue.
Bearish
Shares priced with a premium after leadership change; earnings were cut to reinvest in labor, leaving profitability at risk until traffic improves.
YUM
Bullish
Taco Bell comps around +7% indicate insulation from low-end consumer weakness.
MCD
Bullish
Comparable sales up 2–3%, showing resilience in value-oriented segments.
DPZ
Bullish
Comparable sales up ~5%, demonstrating demand resilience.
TXRH
1 price targets
160
Bullish
Top idea: shares ~160, attractive valuation under 18x 2027 earnings given a 17% recovery margin and strong top/bottom-line growth.
Bearish
Beef inflation concerns could pressure costs for the concept.
People mentioned
Greg FrankfortKateBrian Nickel