Yum! Brands, Inc. (YUM), McDonald’s Corporation (MCD), Chipotle Mexican Grill, Inc. (CMG): This Quick Service Restaurant Is a Good Buy

Yum!’s over 62% of company-owned stores are found in China. It derives more than 50% of its revenue from the Chinese market. In comparison, McDonald’s does not believe in keeping all its eggs in one basket and hence, China represents only 3% of its operating income. So investors who want to follow the good old rule of diversity should go for McDonald’s instead of Yum! which is majorly dependent on China for growth and any problem in the country affects it badly.

The Taco Bell brand of Yum!, which contributes majorly to the success of the brand, faces competition in U.S. market from Chipotle. Chipotle operates 1,450 fast casual and fresh Mexican food restaurants in the United States. Its restaurants primarily offer burritos, tacos, burrito bowls, and salads.

In challenging times, when customer spending in the market declines, Chipotle will probably have a hard time selling its $10 Burrito Bowls. Chipotle’s pricing is high as it caters to the higher end of the market and doesn’t have a budget offering. But Chipotle would offer a better quality of food as it offers premium quality at a premium price. Over here, Yum!’s low-price menu and its focus on the fastest growing economy of the world, i.e. China, makes it a better alternative than Chipotle because even if spending in the U.S. slows down, Yum! can benefit from China and its lower prices than Chipotle.

Conclusion

Taking into account all the facts and figures, it is clearly seen that Yum! can do better and can beat every one’s expectation in the future, if it achieves what it has set out to do in China. Its low price items will help it further in case of a downturn and investors shouldn’t let go of this stock even though it has faced problems in the past.

The article This Quick Service Restaurant Is a Good Buy originally appeared on Fool.com and is written by ANUP SINGH.

ANUP SINGH 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. ANUP 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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