Fast food doesn't always live up to its name. Restaurants are always trying for speedy service, but with varying degrees of success. What does this mean for fast-food restaurant investors? Below, a decade of data shows which chains can fill your order both promptly and precisely -- read on for the winners and losers, as well as a closer look at how these metrics might affect your company's stock price.
Can I take your order?
If you're in your car and your stomach starts to grumble, nothing's easier than pulling into the drive-through of the nearest fast-food chain. Since 1998, research group QSR has been ordering up meals at drive-throughs around the country to see which ones fill orders the fastest. Millions of artery-clogging calories later, here are the results:
Source: Data from QSR.
Wendy's (NAS: WEN) offers service with a smile and speed. Its order times blow away its competition, with a sub-two-minute fill time in 2003. As of 2009, it's still 30 seconds faster than Taco Bell, its closest competitor.
Taco Bell (owned by Yum! Brands (NYS: YUM) ) has come a long way since its three-minute-plus order time in 2000. It kicked off the millennium with a steady five-year decline, and still maintains a second-place position.
McDonald's (NYS: MCD) and Burger King (NYS: BKW) have remained the most steady of the restaurants analyzed here, bumping back and forth between two-and-a-half and three-minute order delivery times. As of 2009, McDonald's brings up the rear with a service time of two minutes and 54 seconds.
Extra mustard, hold the pickles
But no restaurant's speedy service can make up for a wrong order. Accuracy is even more important than timeliness, and there's quite a spread among these restaurants:
Source: Data from QSR.
Wendy's fast food also seems to be the least accurate. In 2009, Wendy's only filled 89% of its orders correctly, compared to Taco Bell's 93%. In 2008, McDonald's achieved a new industry high of 94%, but subsequently dropped to 90% along with Burger King.
Although order speed has increased somewhat throughout the last decade, order accuracy has notably improved throughout the years. In 1998, these restaurants had to chuck an average of 16% inaccurate meals. In 2009, only 9% of all orders contained an error.
Getting what we ordered 19 seconds faster doesn't exactly feel like the greatest achievement of the new millennium, but it's improved the business efficiencies of every company listed here. So what can we, as investors, take away from Wendy's quick service or Taco Bell's accurate orders? Let's take a look at the overall numbers to see what we can find:
Taco Bell/Yum! Brands
Source: QSR and Yahoo! Finance.
Burger King has flipped between public and private more times than a burger on a grill, so it's unfortunately impossible to compare its order efficiencies with stock gains since 1998. For the other three companies, it seems that order accuracy is more correlated with stock price gain than order time. Wendy's first place in order time does little to make up for its last place in order accuracy. The company's stock actually dropped 28% between 1998 and 2009, compared to McDonald's' 249% appreciation and Yum!'s 398% boost.
Accuracy is an important metric to analyze, because it merges customer satisfaction with reduced costs. Restaurant-goers are happy that they received what they ordered, and restaurants don't have to make two meals for the price of one. Simply put, order accuracy supersizes company value by affecting both top-line and bottom-line profit.
Don't sacrifice efficiency for growth
As each of these companies continues to grow, they'll need to remember that growth by itself isn't enough. Arcos Dorados (NYS: ARCO) is McDonald's largest Latin American franchisee and operates over 1,840 stores in 20 countries. Over half of Yum! Brands' operating profits are now generated in China and 72 other emerging markets. Wendy's has outlined a plan to open more than 8,000 restaurants abroad and Burger King plans to open 1,000 new restaurants in China in the next five to seven years.
If these companies can take advantage of growth opportunities without sacrificing order accuracy or other operating efficiencies, they'll set themselves up for sustainable profits for years to come.
For a more comprehensive analysis of the opportunities awaiting two restaurants listed here as well as a surprise stock, The Motley Fool has prepared a special free report, "3 American Companies Set to Dominate the World." This report highlights the efficiencies of these companies, as well as provides macroeconomic analysis of the countries where growth is just getting started. The report is available for a limited time only, so be sure to grab your copy today.
The article 4 Fast-Food Stocks Ordering Up Profits originally appeared on Fool.com.
Fool contributor Justin Loiseau has no material interest in any companies mentioned in this article, but he does dunk his french fries in Wendy's Frostys. You can follow Justin on Twitter, @TMFJLo, and on Motley Fool CAPS.The Motley Fool owns shares of Arcos Dorados Holding and McDonald's.Motley Fool newsletter serviceshave recommended buying shares of McDonald's. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.
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