This Restaurant ETF Could Capitalize on the Growth in Fast Food Chains

The coronavirus pandemic has drastically shifted consumer habits, and fast food chains could continue to capitalize on the rising demand for quick-and-easy food orders, which is bolstering a recently launched restaurant and foodservice exchange traded fund.

McDonald’s, Taco Bell, Chipotle, and other fast-food chains could be taking out a greater market share from sit-down restaurants as consumers grow accustomed to mobile ordering habits, Reuters reports.

McDonald’s revealed first-quarter U.S. comparable sales jumped 13.6% and had 40 million active app users in its six largest markets. The company has been promoting its a loyalty program to attract even more customers.

“With 90%-plus of our business being through the drive-thru, if we can sustain that and return our dining rooms and takeaway to the levels that they were pre-pandemic, we’ve set ourselves up for a very good run here,” Joe Erlinger, head of McDonald’s U.S. operations, said on a call with analysts Thursday.

Additionally, Taco Bell and KFC parent Yum Brands Inc plans to expand ordering through social media platforms and marketing with artificial intelligence.

For the year ended March, fast food chains have overturned the restaurant business landscape, accounting for 70.2% of dollars spent eating out and 82.9% of all restaurant traffic, according to The NPD Group. Americans spent almost $281.6 billion on fast food for the period, a 7.1% increase in market share by dollars that full-service restaurants lost.

Fast food “is going to be the bright spot in the restaurant space for a long time to come,” NPD analyst David Portalatin told Reuters, adding that fast food was already carving out a larger market share before the pandemic.

Investors can look to the AdvisorShares Restaurant ETF (EATZ) as a way to gain targeted exposure to this market segment. EATZ invests solely in the restaurant and foodservice industry, including restaurants, bars, pubs, fast food, take-out facilities, and food catering services, with top component holdings including well-known fast food names like Jack in the Box, Del Taco Restaurants, Yum! Brands, Chipotle Mexican Grill, Starbucks, and Papa Johns.

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