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McDonald’s Corporation (MCD), Chipotle Mexican Grill, Inc. (CMG): The End of Fast Food As We Know It

In cases like these, though, giving traditional fast food brands a facelift is easier said than done. Consumers have a pretty hardwired perception already. It’s hard to achieve a transformation.

Growth on the menu

That brings us to the upstarts like Chipotle Mexican Grill, Inc. (NYSE:CMG), Panera Bread Co (NASDAQ:PNRA), and recent IPO highflier Noodles & Co. All three have more upscale brands and atmospheres, and their fare comes quick and at reasonable prices.

Chipotle Mexican Grill, Inc. (NYSE:CMG)’s recent quarter left former parent McDonald’s Corporation (NYSE:MCD) in the dust, showing strength in the fast or quick-service food area. Chipotle’s recent quarterly same-store sales growth came in at an impressive 5.5%, while Mickey D’s comps paled in comparison, with anemic 1% growth .

The Food with Integrity mission Chipotle Mexican Grill, Inc. (NYSE:CMG) has built into its mission helps shine up that brand; it uses natural, humanely raised, antibiotic-free, and GMO-free ingredients whenever it can. Many consumers would rather consume that kind of fast fare than that of more traditional, lower scale rivals.

Noodles & Co (NASDAQ:NDLS) has gone public with much fanfare, much of it irrational, as is the case with many hot IPOs. Its skyrocketing price right out of the gate means it’s trading at 79 times forward earnings at the moment. While it fits into the upper scale quick-service segment — and has the room for growth in a dining niche that investors find bullish — that’s a stock that needs to come back down to earth.

Still, it’s yet another new-school name gnawing at traditional fast food. It’s known to be a better experience, and its menu includes healthier add-ins like tofu instead of meat.

Companies like Chipotle Mexican Grill, Inc. (NYSE:CMG), Panera Bread Co (NASDAQ:PNRA), and Noodles & Co (NASDAQ:NDLS) are eating traditional fast food companies’ lunches. They have filled an important niche: giving consumers reasonably priced and often healthier meals with a pleasant environment, yet without the time commitment of a full-service restaurant.

A cheap stock in quick food

From the investing standpoint, McDonald’s Corporation (NYSE:MCD) and its traditional, old-school fast food ilk should be avoided. Something’s going awry, and it may not be a permanent sea change. It very well may be defection to these upper scale quickie restaurants, and that’s a trend that’s sure to get even more pronounced and serious if the economy improves.

Noodles & Co (NASDAQ:NDLS) is still overheated with IPO euphoria. It’s not a prudent buy at the moment, but it’s an interesting stock for watch lists and further research. Chipotle Mexican Grill, Inc. (NYSE:CMG) is a strong company and a wonderful long-term holding, but since it’s currently on the market’s fast track, cautious investors may want to wait for a little temporary share weakness before buying in.

The good news is, it’s a good time to look at Panera Bread Co (NASDAQ:PNRA). That company recently received a share price beat down due to a slightly disappointing quarter, but it’s still a strong company. And it’s absolutely in the right place at the right time as traditional fast food companies fight to keep up with such rivals, and even try the extremely difficult — and possibly futile — task of conducting brand facelifts.

So if you’re looking for a reduced-price play on the end of fast food as we know it, take a look at Panera Bread Co (NASDAQ:PNRA). It’s looking the most tantalizing of these stocks right now.

The article The End of Fast Food As We Know It originally appeared on Fool.com is written by Alyce Lomax.

Alyce Lomax owns shares of Chipotle Mexican Grill. The Motley Fool recommends Chipotle Mexican Grill, McDonald’s, and Panera Bread (NASDAQ:PNRA). The Motley Fool owns shares of Chipotle Mexican Grill, McDonald’s, and Panera Bread.

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

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