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Income Inequality: 7 Restaurant Stocks With Upscale Customers

Stocks in this article: ARKR BBRG CAKE DFRG DRI KONA RUTH

James Dennin, Kapitall: Retail for middle class appetites struggle, while luxury outperforms. Here are 7 tasty upscale restaurant stocks. 

The service industry expanded more than expected in January, offsetting losses in manufacturing and the automobile sector, which many have attributed to a particularly brutal winter.

Read more from Kapitall: 6 Real Estate Development Stocks With High Debt

The ISM non-manufacturing index, which tracks the growth of the entire services industry, says it has started growing again at rates unseen since 2010. One of the most obvious beneficiaries of the trend will be the restaurant industry.

However not everyone has been benefitting in the current business climate. As an article in yesterday's  New York Times pointed out, most of the gains in corporate America have been made by firms that cater to higher-end customers.

That's because the government's asset purchasing has swelled the purchasing power of the upper-classes whose stock and real estate portfolios yielded big returns in 2013, which is why high-end retailers like Barney's are edging out companies that cater to the middle class like J.C Penney (JCP) or Loehmanns.

The same trends have been playing out in the restaurant sector. One of the largest diversified restaurant chains in the country, Darden's (DRI) has seen sales in its upscale locations swell, while sales at many of its biggest brands, like Olive Garden and Red Lobster, have stayed flat.

Hedge fund activists and investors have since started pressuring the company's management, to spin-off its higher-end brands into a different company. 

We built a list of restaurant stocks that have leverage on the upscale market. Beginning with a universe of the 30 publicly traded restauranteurs in the United States, we focused the list to only include companies with upscale locations, where the average check per customer is around $60-70, as indicated by their company profiles.

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