Restaurant stocks have taken sharply different paths in 2026, as pressure on consumer spending has exposed a widening gap between companies that can sustain customer traffic and those struggling to protect sales. While restaurant operators face many of the same challenges, including rising costs and increasingly selective consumers, their stock market performance has been far from uniform.
According to an October 23 CNBC report, shares of Brinker International, Darden Restaurants, and Restaurant Brands International had gained approximately 32%, 18%, and 12%, respectively, since the beginning of the year. All three operate multiple restaurant brands. In contrast, several companies built around a single major chain, including McDonald’s, Chipotle, and CAVA, had recorded share price declines.
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The divergence has raised questions about whether operating multiple brands provides an advantage when consumers become more cautious about dining out. However, recent earnings suggest that brand execution, menu pricing, and customer traffic remain just as important as portfolio diversification. However, the industry has brought forth contrasting results, which show that restaurant stocks cannot be evaluated solely on their exposure to consumer spending. Some operators are expanding successfully despite industry pressures, while others face declining restaurant traffic and tighter profitability.
These differences are particularly important for investors evaluating restaurant stocks with substantial analyst-implied upside. A large gap between a company’s current share price and analysts’ price targets may indicate expectations of a recovery or continued growth, but those expectations must be assessed against the company’s actual financial performance. For more insight into the sector, access our meticulously compiled list of the 10 Most Profitable Stocks of the Past 5 Years here for free.
Restaurant traffic, comparable sales, operating margins, and expansion plans provide important evidence for evaluating whether those targets are supported by recent results. Against this backdrop, hedge fund ownership offers another perspective on which restaurant companies have attracted institutional investment interest.
Our Methodology
We compiled a list of the best restaurant stocks that analysts are bullish on and shortlisted the ones with the highest hedge fund holdings, using the data from Insider Monkey’s extensive hedge fund database. The stocks are arranged in ascending order of their analyst upside.
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. Insider Monkey’s quarterly newsletter strategy selects 14 small-cap and large-cap stocks every quarter and has returned 612% since May 2014, beating its benchmark by 375 percentage points (see more details here).
10 Best Restaurant Stocks with the Highest Upside
10. Papa John’s International, Inc. (NASDAQ:PZZA)
Analyst Upside: 14.64%
Number of Hedge Fund Holders: 38
Papa John’s International, Inc. remains focused on restoring sales growth as weaker demand and competition weigh on its North American restaurant network. The company’s third-quarter 2026 results showed North American comparable sales declining 8.3%, while global systemwide restaurant sales fell 5.6% excluding foreign exchange effects. Total company revenue decreased 10.5% to $454.8 million, with Papa John’s attributing the decline to the refranchising transactions and lower performance in North America.
Adjusted EBITDA declined to $38.1 million, reflecting a $9.7 million drop from the prior-year period. Meanwhile, adjusted diluted earnings per share fell to $0.16 from $0.32. Management has introduced its Unbox Better strategy, targeting improvements in food quality, customer value, restaurant execution, and marketing. The company is also increasing its emphasis on local marketing investment by franchisees.
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The investment case depends on whether these operational changes can reverse declining comparable sales and support profitability. Although refranchising changes the company’s revenue composition, the weakness in North American customer demand remains an important challenge that has yet to be resolved.
9. Bloomin’ Brands, Inc. (NASDAQ:BLMN)
Analyst Upside: 17.30%
Number of Hedge Fund Holders: 33
Bloomin’ Brands, Inc. is working to improve performance across its restaurant portfolio, particularly at Outback Steakhouse. Unlike some of the industry’s faster-growing chains, its investment case currently centers on operational improvements and restoring consistent profitability.
The company’s third-quarter 2026 results showed revenue increasing 1.7% to $944.3 million. Comparable sales rose 1.9% at Outback Steakhouse, 0.6% at Carrabba’s Italian Grill, and 5.3% at Bonefish Grill. However, adjusted diluted loss per share widened to $0.17 from $0.03 a year earlier.
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The distinction between reported and underlying performance is significant for investors to note. Third-quarter revenue included $13.2 million associated with a change in the accounting estimate for gift card breakage. While reported restaurant-level operating margin improved, adjusted restaurant-level operating margin declined from 9.5% to 9.3%.
Management nevertheless raised its full-year adjusted earnings guidance to $0.97–$1.02 per share and reported continued improvements in guest scores at Outback. Bloomin’ Brands therefore offers investors an operational turnaround to evaluate, rather than an established period of accelerating earnings growth. Sustained improvements in restaurant traffic, operating efficiency, and adjusted margins remain central to assessing the company’s progress.
8. Yum China Holdings, Inc. (NYSE:YUMC)
Analyst Upside: 24.39%
Number of Hedge Fund Holders: 35
Yum China Holdings, Inc. (NYSE:YUMC) has continued expanding its restaurant network while improving operating profitability, even as existing-store sales remain under pressure. The operator of KFC and Pizza Hut restaurants in China has increasingly relied on store expansion, operational efficiencies, and greater franchise participation to support its business.
According to its third-quarter 2026 earnings release, revenue increased 8% to approximately $3.5 billion, although growth excluding foreign exchange effects was 2%. Operating profit rose 13% to $451 million, and operating margin expanded by 50 basis points year over year to 13%.
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The company opened a record 692 net new stores during the quarter, taking its network to 19,989 locations, with franchisees accounting for 44% of net new openings. Yum China has also maintained a substantial shareholder-return program. It returned $1.08 billion through dividends and share repurchases during the first nine months of 2026. The combination of restaurant expansion, improving profitability, and capital returns supports its investment case, although weaker spending at established locations remains a challenge.
7. BJ’s Restaurants, Inc. (NASDAQ:BJRI)
Analyst Upside: 32.98%
Number of Hedge Fund Holders: 24
BJ’s Restaurants, Inc. has delivered one of the more notable improvements in customer traffic among casual dining operators. Unlike restaurant companies relying primarily on menu price increases to support sales, BJ’s reported approximately 8% growth in both comparable restaurant sales and traffic during the third quarter of 2026.
The company’s November 5 earnings release showed an 8.1% increase in comparable restaurant sales, contributing to an 8.6% rise in total revenue to $358.6 million. Restaurant-level operating profit increased 27.9% to $52.9 million, while its corresponding margin improved from 12.5% to 14.7%. This indicates that higher restaurant volumes translated into stronger operating profitability rather than being entirely absorbed by expenses.
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Management also raised its fiscal 2026 guidance, increasing its adjusted EBITDA forecast to between $149 million and $154 million. The company operates 219 restaurants and is concentrating on menu innovation, customer experience, and improving restaurant productivity.
BJ’s investment case is supported by measurable improvements in both sales and margins. Maintaining these gains as consumer spending patterns change remains important, particularly because full-service dining businesses continue to face labor and operating cost pressures.
6. CAVA Group, Inc. (NYSE:CAVA)
Analyst Upside: 33.78%
Number of Hedge Fund Holders: 37
CAVA Group, Inc. (NYSE:CAVA) continues to generate substantial revenue growth through restaurant expansion, but its latest financial results illustrate the increasing importance of profitability as the chain becomes larger.
During the third quarter of fiscal 2026, revenue increased 22.1% to $353.7 million, supported primarily by restaurant openings and a 3.1% increase in same-restaurant sales. CAVA opened 24 net new locations, reaching 500 restaurants and reflecting a 20.5% growth in total CAVA restaurants year over year. However, almost all comparable-sales growth came from menu pricing and product mix, with guest traffic improving only slightly.
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Meanwhile, restaurant-level profit increased 16.2% to $82.7 million, but its margin declined by 120 basis points to 23.4%. The company attributed this pressure partly to labor investments, delivery costs, and restaurant maintenance. Net income also declined to $13.2 million from $14.7 million a year earlier. Management updated its full-year outlook to 76–78 net new restaurant openings and same-restaurant sales of 6%–7%.
CAVA’s continued expansion and positive restaurant-level profitability remain central to its investment appeal. However, the divergence between revenue growth and earnings growth means investors must distinguish the benefits of a larger restaurant footprint from improvements in profitability at individual locations.
5. Brinker International, Inc. (NYSE:EAT)
Analyst Upside: 34.51%
Number of Hedge Fund Holders: 48
Brinker International, Inc. (NYSE:EAT) has emerged as one of the stronger performers in casual dining, supported by sustained sales growth at Chili’s. Its latest results demonstrate how improvements in customer demand and restaurant operations can strengthen profitability despite broader pressure on consumer spending.
In the first quarter of fiscal 2027, Chili’s comparable sales increased 10.1%, marking the chain’s 22nd consecutive quarter of comparable-sales growth. Brinker reported total company sales of $1.46 billion in fiscal Q1 2027, compared with $1.33 billion a year earlier, while operating income rose to $151 million from $117.9 million.
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Importantly, restaurant operating margin expanded to 17.7% from 16.2%, indicating that sales growth was accompanied by improved operating profitability. However, performance across Brinker’s brands was uneven, with Maggiano’s comparable sales declining 3.4%. Also read our list of the 10 Best Dividend Stocks with Monthly Payout to make an informed investment decision.
Management raised its fiscal 2027 revenue guidance to $6.23 billion–$6.33 billion, although the forecast includes an additional operating week. Chili’s continued ability to attract customers provides a measurable foundation for Brinker’s earnings performance. Nevertheless, the difference between Chili’s growth and Maggiano’s weaker sales demonstrates that the benefits of a multi-brand business ultimately depend on how its individual restaurants perform.
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4. First Watch Restaurant Group, Inc. (NASDAQ:FWRG)
Analyst Upside: 36.43%
Number of Hedge Fund Holders: 27
First Watch Restaurant Group, Inc. (NASDAQ:FWRG) continues expanding its breakfast, brunch, and lunch restaurant network despite a challenging consumer spending environment. Its investment case rests on the combination of restaurant development and improvements in earnings, although recent traffic figures suggest that growth at existing locations remains relatively modest.
In the third quarter of 2026, total revenue increased 10.7% to $349.9 million, while adjusted EBITDA rose to $39.7 million from $34.1 million a year earlier. First Watch opened 16 systemwide restaurants in 11 states during the quarter, bringing its network to 681 locations across 33 states.
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The underlying sales figures provide a more measured picture. Same-restaurant sales increased 1%, but customer traffic declined 1.9%. Restaurant-level operating profit margin also narrowed slightly to 19.4% from 19.7%. Nevertheless, management maintained its expansion plans and updated its fiscal 2026 outlook to approximately 60 net new systemwide restaurants and $136 million in adjusted EBITDA.
For investors, the distinction between new-unit growth and existing-restaurant performance is particularly important. First Watch has continued growing total revenue and adjusted earnings, but stronger customer traffic would provide additional support for its expansion strategy and restaurant profitability.
3. Kura Sushi USA, Inc. (NASDAQ:KRUS)
Analyst Upside: 52.78%
Number of Hedge Fund Holders: 24
Kura Sushi USA, Inc. (NASDAQ:KRUS) presents a different investment proposition from restaurant operators already benefiting from stronger customer traffic. The technology-enabled Japanese revolving sushi chain continues expanding its US footprint.
In its fiscal fourth-quarter 2026 results, Kura Sushi reported total sales of $88.9 million, compared with $79.4 million a year earlier. However, comparable restaurant sales declined 5.7%, including an 11.5% reduction in customer traffic that was partially offset by higher prices and product mix. The company recorded a net loss of $0.3 million, compared with a $2.3 million profit in the prior-year quarter.
Kura Sushi’s technology-driven operating model remains central to its longer-term development. Management reported that labor efficiencies helped offset higher costs associated with tariffs during fiscal 2026, demonstrating the operational benefits of its restaurant technology.
The company expects to open 17 restaurants in fiscal 2027 and has projected annual sales of $376 million to $381 million. However, with comparable traffic declining, the important distinction is between growth generated by adding locations and improving demand at established restaurants. If you are looking for the best stocks to retire on, access our complete list here for free.
2. Dutch Bros Inc. (NYSE:BROS)
Analyst Upside: 54.24%
Number of Hedge Fund Holders: 53
Dutch Bros Inc. (NYSE:BROS)’s investment case is supported by rapid shop expansion, sustained comparable-sales growth, and rising profitability, distinguishing the company from restaurant operators struggling to maintain customer traffic.
In its third-quarter 2026 earnings release, Dutch Bros reported revenue of $549.8 million, an increase of 29.8% year over year. Company-operated same-shop sales increased 5.4%, while systemwide same-shop sales rose 4.4%. The company also recorded positive growth in customer visits, indicating that higher spending alone did not account for its sales improvement.
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Dutch Bros opened 48 new shops during the quarter, while adjusted EBITDA increased 29.6% to $101.1 million. Net income rose to $37.2 million from $27.3 million in the prior-year period. Management has accelerated its expansion strategy, targeting approximately 250 new shops in 2027, compared with at least 185 openings planned for 2026. The company is also exploring new food offerings and delivery services.
With revenue and adjusted EBITDA growing at similar rates, Dutch Bros has maintained its operating momentum. However, the performance of new locations and sustained customer traffic make up important measures of future progress for the company.
1. Arcos Dorados Holdings Inc. (NYSE:ARCO)
Analyst Upside: 58.50%
Number of Hedge Fund Holders: 23
Arcos Dorados Holdings Inc. (NYSE:ARCO), the world’s largest independent McDonald’s franchisee, offers investors exposure to restaurant consumption across Latin America and the Caribbean. Its recent financial performance reflects growing customer demand alongside improvements in profitability.
In the second quarter of 2026, Arcos Dorados reported revenue of $1.31 billion, an increase of 14.3% year over year. Systemwide comparable sales rose 15.3%, supported by the best guest volume performance the company saw in the last six quarters. Net income nearly doubled to $45 million, setting a record for a second quarter, while adjusted EBITDA increased 15.2% to $126.8 million.
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The company’s digital operations are another important part of its strategy. Digital channel sales grew approximately 25% and accounted for 66% of systemwide sales during the quarter. These channels include self-order kiosks, delivery, and loyalty programs, which provide additional ways to reach customers.
Although the results demonstrate improving operating performance, investors need to keep an eye out for factors such as differences in inflation, currencies, and consumer demand across its markets.
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