McDonald’s Corporation (MCD), Chipotle Mexican Grill, Inc. (CMG): There’s More Than Just Jack in the Box Inc. (JACK)

McDonald’s Corporation (NYSE:MCD) goal is to invest in its business and return excess free cash flow to shareholders. In the second quarter, McDonald’s returned $1.2 billion to shareholders in the form of dividends and repurchases. The company now pays an annual dividend of $3.08 per share for a yield of 3.1%. It is 81% franchised, a factor that has helped to keep cash flow high. Franchise margins contribute 70% of all profits, and gives McDonald’s a stable and predicable income stream.

For Chipotle Mexican Grill, Inc. (NYSE:CMG), it is in the fortunate position in that no company has yet come close to replicating its unique culture and dining experience. The company has a devoted customer base that love its fresh and tasty food. Second quarter results pretty much summed up Chipotle’s story: revenues increased by 18.2%, comparable restaurant sales increased 5.5%, and net income increased 7.6%.

There appears to be no slowdown in sight for the Chipotle Mexican Grill, Inc. (NYSE:CMG) business model. The company is on track to open 165 to 180 new restaurants this year. There are now over 1,500 locations, and international markets are untapped. To boost same-store sales, Chipotle is starting to rollout catering in select locations which have thus far seen catering account for 1% of total sales. As more locations offer this option and customers become aware of its availability, look for catering to boost same-store sales further.

Foolish assessment

It remains to be seen if Qdoba can be the driver of growth for Jack in the Box. There has been talk for years about spinning off the Qdoba chain. Now that a new President is in charge, it remains to be seen the next moves for the Qdoba business.

In looking at Jack in the Box Inc. (NASDAQ:JACK), it trades at an enterprise value/earnings before interest, taxes, depreciation and amortization of 9.79. Its forward price-to-earnings multiple is 19. While both metrics are reasonable, shares are up almost 55% in the past year. The company is a long way from giving McDonald’s and Chipotle Mexican Grill, Inc. (NYSE:CMG) a run for their money, however. I’d advise waiting on the results of the company’s move to a franchise model for Jack in the Box and restructures its Qdoba operations.

The article There’s More Than Just Jack in the Box originally appeared on Fool.com and is written by Mark Yagalla.

Mark Yagalla has no position in any stocks mentioned. The Motley Fool recommends Chipotle Mexican Grill and McDonald’s. The Motley Fool owns shares of Chipotle Mexican Grill and McDonald’s. Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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