Starbucks and QSR: Future Trends in the Restaurant Industry

Restaurant Industry Insights for 2025

BofA Securities analysts, Sara Senatore and Katherine Griffin, have shared their predictions for the restaurant sector as we move into 2025. Their insights indicate a cautiously optimistic outlook with several dynamics at play.

Job Growth and Restaurant Demand

According to the analysts, slow yet steady job growth is expected to bolster the demand for restaurants. This gradual increase in employment is vital as it underpins consumer spending in the food service sector.

Pricing and Promotions

The analysts project that restaurant pricing will become more moderate, which could lead to an uptick in promotional activities. As input prices begin to decline, eateries may enhance their offers, making dining out more attractive to consumers.

Growth Patterns and Consumer Behavior

The analysts noted that the overall growth of the restaurant industry in 2024 aligns closely with historical trends. They observed that the Blackbox industry same-store sales growth (SSSG) was at -0.2%, slightly off from the 2013-2019 average of -0.1%. In tandem, personal consumption expenditures (PCE) showed a growth of +4.9%, relatively close to the pre-COVID average of +5.1%.

Shifts in Dining Preferences

A significant observation by Senatore and Griffin is the atypical growth patterns within different dining segments. While fine dining and traditional quick service have not performed as expected, midscale and casual dining categories have seen robust demand. This shift is attributed to a general reversion to pre-COVID dining habits, which analysts predict will lead to more consistent growth moving forward.

Starbucks Corporation's Performance

The analysts have maintained a Buy rating on Starbucks Corporation (NASDAQ: SBUX), projecting a target price of $117. Their confidence stems from the brand’s resilience and its ability to effectively reallocate resources to areas that promise greater returns.

Restaurant Brands International's Challenges

Conversely, a restrictive outlook has been placed on Restaurant Brands International Inc. (NYSE: QSR), as the analysts anticipate reinvestment needs will place constraints on topline and earnings per share (EPS) growth. Lower revenue forecasts for QSR reflect increasing competitive pressures in the market.

Krispy Kreme and Sysco Corporation

The analysts have also revised their forecasts for Krispy Kreme, Inc. (NASDAQ: DNUT), reducing the price target from $17 to $14. This is due to anticipated lower topline growth alongside rising operating expenses in the first half of 2025.

Meanwhile, Sysco Corporation (NYSE: SYY) sees a maintained price forecast of $87, pointing towards higher EBITDA estimates that arise from lower anticipated operating expenses.

Looking Ahead

As the restaurant industry navigates these challenges and opportunities, insights from BofA Securities present a nuanced view of what to expect. Recognizing shifts in consumer behavior and economic indicators will be pivotal for stakeholders in understanding the evolving landscape.

Frequently Asked Questions

What key factors will influence restaurant demand in 2025?

Job growth and moderate pricing changes are vital to supporting demand in the restaurant sector.

How are different dining segments performing?

Midscale and casual dining are performing better compared to fine dining and traditional quick service.

What is the outlook for Starbucks?

Analysts have a Buy rating for Starbucks, forecasting a price target of $117 due to its strong brand presence.

What challenges does Restaurant Brands International face?

QSR faces constraints on growth due to reinvestment needs and increasing market competition.

What are the forecasts for Krispy Kreme?

Krispy Kreme's price target has been lowered from $17 to $14 due to expected lower growth and higher expenses.

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