In this article, we will look at the Top 10 Restaurant Stocks to Buy Under $20.
The Impact of Trump’s Tariffs on the Restaurant Industry
Restaurant stocks are showing volatility amid Trump’s tariff impositions across various sectors. On April 7, CNBC reported that while US stocks are tumbling due to the effects of high tariffs on the import of goods from key trading partners, analysts do not anticipate the tariffs to hit most restaurant stocks directly. However, inflation is expected to follow behind, fueled by expert and investor fear of an impending recession. This may put pressure on the spending capacity of consumers, resulting in an economic downturn.
CNBC reported that UBS analyst Dennis Geiger said the following in a note to clients:
“We view the direct cost impact of tariffs on restaurants as manageable, with a focus on select commodity costs, but see the bigger risk as incremental pressure on consumer spending and industry demand.”
CNBC also reported that investor concerns affected restaurant stocks across all sectors. Fast food restaurant chains have historically shown the most resilience during recessions, as consumers looking for cheap dining options typically level down from fast-casual or full-service diners and eateries to fast food options. However, the drop in consumer spending witnessed last year saw fast food restaurants hit hard, as low-income consumers cut their spending to this sector, visiting them less frequently. High-income consumers, on the other hand, continued with their usual dining habits, creating a gap that negatively affected fast food companies. Quick-service restaurants thus underwent same-store sales declines.
How Are High-Income Consumers Behaving?
On March 8, Mario Carbone, Major Food Group chef and co-founder, appeared on CNBC’s ‘Power Lunch’ to discuss the effects of Trump’s tariffs on the food industry and how high-end consumers are behaving in the sector. Talking about New York, he said that the numbers are booming, going above their pre-Covid benchmarks. New York is thus telling us that everything is good, and there is no fear right now in dining in the luxury sector. Stats are up, and restaurants are packed, with consumer energy through the roof. As of right now, there are no signs of slowing at all if one evaluates the spending and trends in restaurant reports.
However, Carbone said that inflation hits the food and restaurant industry just like everyone else. The luxury food sector is responsible to the customer for bringing in the best ingredients for every meal, which is why it has no choice but to pass the effects on to the consumer in case such trends materialize.
With these trends in view, let’s look at the 10 restaurant stocks to buy under $20.
An employee serving a customer at a dine-in Fast Casual Restaurant.
Our Methodology
We sifted through stock screeners, financial media reports, and ETFs to compile a list of 20 restaurant stocks under $20 as of April 13, 2025, and chose the top 10 most popular among hedge funds as of Q4 2024. The list is ordered in ascending order of hedge fund sentiment. We sourced the hedge fund sentiment data from Insider Monkey’s database.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Top 10 Restaurant Stocks to Buy Under $20
10. Potbelly Corporation (NASDAQ:PBPB)
Share Price: $8.24
Number of Hedge Fund Holders: 14
Potbelly Corporation (NASDAQ:PBPB) owns and operates sandwich restaurants. The company offers various food options, including signature salads, toasty sandwiches, soups, chili, cookies, and other fresh menu items. It operates around 440 shops in 31 US states and the District of Columbia, of which 90 are franchised.
In 2024, Potbelly Corporation (NASDAQ:PBPB) reignited unit growth by opening 23 new shops, adding 115 units to its open and committed shop total. It also drove adjusted EBITDA growth of 15% through corporate cost management and expanded shop margins. The company is also focusing on developing long-term growth drivers to strengthen its operations and improve customer experiences, such as the relaunch of its perks loyalty program and significant menu innovation.
Its digital business represented over 40% of Potbelly Corporation’s (NASDAQ:PBPB) total shop sales, a growth of around 100 basis points compared to last year. Craig-Hallum analyst Jeremy Hamblin maintained a Buy rating on the company on April 8. The company ranks tenth on our list of the best restaurant stocks to buy under $20.
9. First Watch Restaurant Group, Inc. (NASDAQ:FWRG)
Share Price: $17.54
Number of Hedge Fund Holders: 15
First Watch Restaurant Group, Inc. (NASDAQ:FWRG) owns and operates restaurants on a daytime dining concept, providing made-to-order breakfast, lunch, and brunch with cocktails and alcohol. It operates around 572 restaurants, of which 489 are owned by the company, and 83 are franchise-owned.
On April 1, TD Cowen analyst Andrew Charles upgraded the rating on First Watch Restaurant Group, Inc. (NASDAQ:FWRG) to a Buy, setting a price target of $22.00. The analyst told investors he anticipates 2025 to be a year of improved same-store sales, supported by effective and enhanced marketing strategies and increased marketing expenditure. According to the analyst, the company’s marketing spending as a percentage of revenue is significantly low compared to industry standards, which represents the potential for growth.
He also opined that First Watch Restaurant Group, Inc. (NASDAQ:FWRG) is recovering from the sales challenges it came across in 2024, as positive trends are emerging in key markets such as Florida and improvements are materializing in third-party delivery traffic. The analyst also highlighted the potential upside in adjusted EBITDA estimates, especially with the fall in egg prices, which could help relieve commodity inflation pressures. In addition, the opportunity for administrative and general leverage implies a significant advantage. The analyst estimated that these trends put First Watch Restaurant Group, Inc. (NASDAQ:FWRG) in a beneficial position for improved financial performance in the coming years.
8. Denny’s Corporation (NASDAQ:DENN)
Share Price: $2.99
Number of Hedge Fund Holders: 16
Denny’s Corporation (NASDAQ:DENN) operates franchised and licensed restaurants. Its operations are divided into Denny’s and Other segments. The Denny’s segment manages all company-franchised and licensed Denny’s restaurants, while the Other segment covers all company and franchise restaurants.
Fiscal Q4 2024 was a strong quarter for the company’s brands, Denny’s and Keke’s. Denny’s maintained positive quarter-over-quarter same-restaurant sales of 1.1%, while Keke’s generated the same of positive 3%. Denny’s also reported domestic systemwide, same-restaurant sales of positive 1.1% for fiscal Q4 2024, outperforming the BI Family Dining Index for the fourth consecutive quarter. Its domestic franchise restaurants delivered same-restaurant sales of 1.2%.
Denny’s Corporation (NASDAQ:DENN) also has strong off-premises sales, reaching 21% in fiscal Q4 2024. This was supported by a 70 basis point increase in same-restaurant sales from the launch of its third virtual brand, Banda Burrito. Analysts are bullish on the stock, and its median price target of $2.99 implies an upside of 167.56% from current levels. The company ranks eighth on our list of the top 10 restaurant stocks to buy under $20.
7. El Pollo Loco Holdings, Inc. (NASDAQ:LOCO)
Share Price: $9.55
Number of Hedge Fund Holders: 18
El Pollo Loco Holdings, Inc. (NASDAQ:LOCO) develops, franchises, and licenses quick-service restaurants under the name El Pollo Loco. It specializes in fire-grilling fresh chicken and offers various popular food options, such as Pollo Bowls, Pollo Fit entrees, and more.
In a report released on April 8, Jeremy Hamblin from Craig-Hallum maintained a Buy rating on El Pollo Loco Holdings, Inc. (NASDAQ:LOCO). Craig-Hallum analyst Jeremy Hamblin also initiated company coverage on March 11 and set a Buy rating with an $18 price target. The analyst said that the company’s new management team holds extensive QSR experience and is thus revitalizing the brand, driving record AUVs and around 200 bps of margin expansion in fiscal year 2024.
El Pollo Loco Holdings, Inc. (NASDAQ:LOCO) also holds a unique position in the fast-growing chicken sector, and menu innovation in 2025 is expected to be a key driver of growth for the company, according to the firm. The firm sees further rest-level margin expansion to 18% based on food cost and labor initiatives. The lapping of the FAST Act in California will limit future wage pressure. The firm also cited the underpenetrated digital channel as a significant opportunity to drive margin and sales. The company ranks seventh on our list of the best restaurant stocks to invest in.
6. Arcos Dorados Holdings Inc. (NYSE:ARCO)
Share Price: $7.22
Number of Hedge Fund Holders: 21
Arcos Dorados Holdings Inc. (NYSE:ARCO) is a McDonald’s franchisee operating or franchising more than 2,140 McDonald’s-branded restaurants. Its operations are divided into four geographical categories: Brazil, the Carribean, the North Latin America division (NOLAD), and the South Latin America division (SLAD).
Analysts believe that Arcos Dorados Holdings Inc.’s (NYSE:ARCO) stock provides an attractive entry point. The company holds a competitive market edge due to its restaurant portfolio. More than half of its restaurants are free-standing units, which provide a mix of takeout, drive-thru, and delivery service options and boost restaurant sales.
On October 1, 2024, the company announced that it would exercise its option to renew its Master Franchise Agreement (MFA) with McDonald’s for another 20 years starting in 2025. This agreement has strengthened the company’s strategic footing, which stems from the geographic diversification of its solid restaurant base throughout Latin America.
On April 1, BTG Pactual initiated coverage of Arcos Dorados Holdings Inc. (NYSE:ARCO) with a Buy rating and a $10.50 price target. Analysts have bullish sentiments for the stock, and their median price target of $7.22 implies an upside of 45.43% from current levels.
Brennan Asset Management stated the following regarding Arcos Dorados Holdings Inc. (NYSE:ARCO) in its Q4 2024 investor letter:
“Arcos Dorados Holdings Inc. (NYSE:ARCO): Rough 2024…Shares Substantially Undervalued: ARCO produced solid operating results throughout 2024, but negative currency movements, including a near freefall in the Brazilian Real (over 20 percent decline), drove investors to dump ARCO shares. As we noted in our Q3 letter, ARCO announced that it renewed its master franchise agreement (MFA) with McDonald’s (MCD) at terms that were better than many anticipated. While we won’t rehash the entire ARCO thesis (see our 2023 Q2 and Q3 letters for more color), we continue to believe that ARCO is a unique asset (the license to operate essentially all MCD restaurants from Mexico south) that was turbocharged by COVID’s aftereffects. During and after COVID, a large percentage of restaurants closed and there was rapid adoption of drive-through and delivery sales. ARCO disproportionately benefited, given its larger share of free-standing stores. ARCO has a strong balance sheet (including substantial real-estate value), strong incremental returns on capital and a substantial growth opportunity. Brazil faces macro challenges, and further currency weakness is distinctly possible. That said, ARCO has a history of achieving same[1]store sale growth above inflation rates and Brazil has some of the highest delivery penetration rates and digital adaptation rates in all of LATAM. Furthermore, there is no reason for ARCO not to move its listing from New York to Sao Paulo and greatly neutralize the reporting impact from currency fluctuations. We strongly believe ARCO is mispriced at current levels.”
5. Portillo’s Inc. (NASDAQ:PTLO)
Share Price: $12.00
Number of Hedge Fund Holders: 22
Portillo’s Inc. (NASDAQ:PTLO) is a fast-casual restaurant company that serves Chicago Street food in multichannel restaurants. The company reported a total revenue of $184.6 million for fiscal Q4 2024, while full-year revenue was $710.6 million. Restaurant-level adjusted EBITDA for fiscal Q4 2024 was $45.2 million and $168.1 million for the full year, with a margin of 23.7%.
The addition of kiosks at all of the company’s restaurants supported top-line momentum in the quarter, driving a comp lift of more than 1% through the mix. Management is continuing to explore the role of the kiosks in its business.
Portillo’s Inc. (NASDAQ:PTLO) is also continuing to expand its operations and plans to open 12 new restaurants in 2025. This includes its first restaurant in Georgia, while most of the rest will be in Texas. A majority of the openings will be concentrated in the year’s second half, and its strong pipeline is expected to lead to a more balanced 2026.
Stifel Nicolaus analyst Chris O’Cull maintained a Buy rating on Portillo’s Inc. (NASDAQ:PTLO) on March 3 and set a price target of $17.00.
White Brook Capital Partners stated the following regarding Portillo’s Inc. (NASDAQ:PTLO) in its Q4 2024 investor letter:
“Portillo’s Inc. (NASDAQ:PTLO) is up over 20% so far this year. On January 14, the Company preliminarily announced same store sales growth and gave supportive guidance for 2025 driving much of that stock improvement. But the even more important news should have been picked up during 2024, and was simply overlooked. During the third quarter, they announced they would explore financing the building for their new stores, rather than leasing the ground, but financing the building themselves. The move meant that the company can grow more quickly while also allowing for free cash flow after growth investments to begin to flow to the bottom line. This is exactly the scenario outlined in my bull case write-up last year. We were obviously too early in establishing our position in 2024, but this is the setup that we outlined in our thesis, and one that, as they execute, should prove lucrative.”
4. Bloomin Brands, Inc. (NASDAQ:BLMN)
Share Price: $7.05
Number of Hedge Fund Holders: 26
Bloomin’ Brands, Inc. (NASDAQ:BLMN) is a Florida-based restaurant holding company with four brands: Outback Steakhouse, Fleming’s Prime Steakhouse & Wine Bar, Carrabba’s Italian Grill, and Bonefish Grill. The company owns and operates more than 1,450 restaurants in 45 US states, Guam, and 13 countries, some of which are franchises. Its operations are divided into two segments: International and US.
On December 30, 2024, the company completed the sale of 67% of its Brazil operations to a fund managed by an affiliate of Vinci Partners, retaining a 33% interest. Analysts believe this move will streamline Bloomin’ Brands, Inc.’s (NASDAQ:BLMN) business and boost operational efficiency by allowing it to concentrate on its domestic market.
The company is also taking several actions to address its near-term business results, such as focusing on building sustainable traffic and profitable comparable restaurant sales growth by improving quality, value, and guest experience. Analysts are bullish on Bloomin’ Brands, Inc.’s (NASDAQ:BLMN) potential, and its median price target of $7.05 implies an upside of 63.12% from current levels. The company ranks fourth on our list of the best restaurant stocks to invest in under $20.
3. Dine Brands Global, Inc. (NYSE:DIN)
Share Price: $19.68
Number of Hedge Fund Holders: 29
Dine Brands Global, Inc. (NYSE:DIN) owns and franchises casual and family dining restaurants, including Applebee’s and IHOP. Its operations are divided into Franchise, Rental, Company Restaurant, and Financing Operations segments.
The company generated $106.4 million in adjusted free cash flow in fiscal year 2024, reflecting a $103.3 million growth over last year. The steady state of its cash flow shows the financial stability and resilience of Dine Brands Global, Inc.’s (NYSE:DIN) platforms through market cycles. This positions the company to make the necessary investments for improved performance.
In 2025, the company is focusing on opportunities to leverage its strong free cash flow, scale, and expertise to improve brand performance. Dine Brands Global, Inc. (NYSE:DIN) is doing so by improving guest experience through menu enhancements and improved operations, along with dynamic marketing initiatives. Analysts are bullish on the stock, and its median price target of $19.68 implies an upside of 34.65% from current levels. The company takes the third spot on our list of the top restaurant stocks to buy now under $20.
2. Cannae Holdings, Inc. (NYSE:CNNE)
Share Price: $16.99
Number of Hedge Fund Holders: 29
Cannae Holdings, Inc. (NYSE:CNNE) manages and operates a group of companies and investments. Its operations are divided into Restuarant Group, Dun & Bradstreet, Alight, Black Knight Football and Entertainment, Corporate, and Other. Its Restaurant Group manages the operations of O’Charley’s, 99 Restaurants, Legendary Baking Holdings I LLC, and VIBSQ Holdco LLC.
The company has undertaken various initiatives that reflect the strength of its operations. These include a Dutch tender auction where Cannae Holdings, Inc. (NYSE:CNNE) repurchased over $200 million of its shares, acquisition of a majority stake in the Watkins Company, initiation of a regular quarterly dividend, and consistent cash flow generation. It is also focusing on its portfolio companies to improve their values and raised $470 million of cash from portfolio company sales in the year to fund share repurchases and new investments to continually rebalance its portfolio.
In a report released on February 25, Ian Zaffino from Oppenheimer maintained a Buy rating on Cannae Holdings, Inc. (NYSE:CNNE) and set a price target of $27.00. It is the second-best restaurant stock to buy under $20.
1. The Wendy’s Company (NASDAQ:WEN)
Share Price: $12.79
Number of Hedge Fund Holders: 33
The Wendy’s Company (NASDAQ:WEN) operates, develops, and franchises a range of quick-service restaurants. It specializes in made-to-order hamburgers, made using fresh beef available in the contiguous US, Canada, and Alaska. It also offers other signature items such as chili, salads, baked potatoes, and the Frosty dessert. The company’s operations are divided into Wendy’s U.S., Wendy’s International, and Global Real Estate & Development. The Wendy’s Company (NASDAQ:WEN) and its franchises have more than 7,000 restaurants across the globe.
Wendy’s Company (NASDAQ:WEN) updated its capital allocation policy in fiscal Q4 2024, announcing a new target dividend payout ratio of 50% to 60% of adjusted earnings. The company’s new capital allocation policy allows it to maximize long-term shareholder value and accelerate growth.
The company’s operations show resilience. Fiscal year 2024 marked the company’s 14th consecutive year of global same-restaurant sales growth. Wendy’s Company’s (NASDAQ:WEN) systemwide sales rose 5.4% in fiscal Q4 2024, reaching $3.7 billion. Total revenues for the quarter were $574.3 million, and adjusted revenues were $459.3 million, an increase of 6.4%. Its adjusted EBITDA also underwent an 8.6% increase, reaching $137.5 million.
In a report released on March 12, Jake Bartlett from Truist Financial maintained a Buy rating on Wendy’s Company (NASDAQ:WEN). Its median price target of $12.79 implies an upside of 27.05% from current levels.
Overall, WEN ranks first among the top 10 restaurant stocks to buy under $20. While we acknowledge the potential of restaurant stocks, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than WEN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
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