Editor's note: As part of our partnership with Nightly Business Report, TheStreet's Debra Borchardt joined NBR on Monday (see video and transcript here) to discuss overlooked restaurant stocks that look ready to sizzle.
NEW YORK (TheStreet) -- The explosive growth in up and coming chains like Five Guys, Smashburger and Elevation Burger have the old school fast food guys looking scared. McDonald's (MCD) saw this coming and has made adjustments to fit the fast casual model. Sprucing up the restaurants and trying to improve the quality of the food has helped. But it's not possible to be all things to everyone and this is where fast food will lose customers.
Wendy's (WEN) admits they are behind the curve. CEO Emil Brolick said on CNBC recently: "We're reimaging our restaurants." So far this has been done in only 10 locations where the company is "testing products that fit in that strategy," Brolick continued.
The turnaround is going to take some time though and as Wendy's slowly tweeks its approach, Five Guys and others will no doubt be happily stealing customers.Fast casual dining stocks like Chipotle Mexican Grill (CMG) and Panera Bread (PNRA), are on a tear. Over the past year, Chipotle shares have jumped 38%, while Panera has gained 28%. Buffalo Wild Wings (BWLD) is another hot name, rising more than 50%. Investors will probably see less performance out of these stocks going forward as profits are taken and growth slows. Fear not though, there are still some overlooked hamburger stocks poised to sizzle that could deliver some super-sized returns. One is Red Robin Gourmet Burgers (RRGB), which was recently upgraded by TheStreet Ratings to a buy. The chain is creating a new concept called Burger Works to better compete with the likes of Five Guys and SmashBurger. It looks like the build-out costs for these restaurants is lower than the standard Red Robin and more stores are planned for 2012.
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