McDonald’s Corporation (MCD), Yum! Brands, Inc. (YUM), Panera Bread Co (PNRA): Gen-Y’s Disruption of the Fast Food Industry

Page 2 of 2

Revenue is expected to be up 14% in 2013, driven by same-store sales growth of 5%. Panera Bread Co (NASDAQ:PNRA) has been a big benefactor of the Gen-Y’s preference for fresh foods. The company plans to add upwards of 120 restaurants this year.

One of Panera Bread Co (NASDAQ:PNRA)’s big advantages has been its constant introduction of new menu items, rallied around its core salads and sandwich offerings. Meanwhile, the company recently launched a new pasta menu.

The next step for Panera Bread Co (NASDAQ:PNRA) is tapping the fast growing catering market. The company has pointed out that the catering segment has grown over 20% yearly. I really like this company, despite its 26 times P/E; this P/E is still well below top fresh-food comp Chipotle Mexican Grill, Inc. (NYSE:CMG)‘s 42 times. 

Bottom line

Despite trading relatively in line with Yum! for a number of years, McDonald’s is seeing a strange dichotomy that is taking place relative to the two’s P/E ratios…

Of course Panera Bread Co (NASDAQ:PNRA) trades at a premium given the company’s red-hot growth prospects. However, I feel it unfair that Yum! trades at a premium, especially given the company’s struggles in China. Even though McDonald’s has its work cut out for it related to appealing to Gen-Y’ers, I like the company from a valuation standpoint, not to mention its 3.2% dividend yield.

Marshall Hargrave is short Yum! Brands. The Motley Fool recommends McDonald’s and Panera Bread. The Motley Fool owns shares of McDonald’s and Panera Bread.

The article Gen-Y’s Disruption of the Fast Food Industry originally appeared on Fool.com and is written by Marshall Hargrave.

Marshall is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Page 2 of 2