These days technology seems to be everywhere. From banking to our workplace, our lives are becoming ever-more linked to technology and digitized. That’s why overweighting tech stocks makes a ton of sense for the long haul. And believe it or not, technology is finding its way into your local burger joint or where you buy a cup of coffee.
A variety of restaurants have caught the technology bug.
Plowing billions of R&D spending into new apps, artificial intelligence, data mining and other tech-based applications, many restaurants aren’t just a place to grab a drink or a bite to eat. They are quickly becoming some of the biggest adopters of hottest trends in tech. Today, the decidedly low-tech French fry has plenty in common with Google (NASDAQ:GOOG). You might even say that some restaurant shares deserve to be called tech stocks.
And those early adopters in the restaurant sector do earn that title. Thanks to these tech upgrades, sales, profits and margins have been surging. Proof that you can get plenty of growth by thinking differently. To that end, these three restaurants are really wonderful tech stocks in disguise.
Food-Based Tech Stocks to Buy: McDonald’s (MCD)
Fast-food giant and burger slinger McDonald’s (NYSE:MCD) may soon want to change its name to McData. The Golden Arches has gone full hog into adding tech into a variety of its processes. This includes products to speed up order and fulfillment, mobile apps and even a hefty dose of A.I.
To start with, MCD’s made mobile ordering a key piece under its “Velocity Growth Plan.” Through the app, customers have the ability to choose when and how they want to pick-up their food. More importantly, the app is synchronized to a customer’s digital wallet and their delivery partnership with Uber (NASDAQ:UBER).
What’s wonderful for McDonald’s is they’ve found that when a consumer uses the mobile app or one of its new self-ordering kiosks, they tend to order more food or extra side items. This has helped boost comparable-store sales. Last quarter, tech helped the Golden Arches see same-store-sales jump 6.5% — the biggest jump in four years. Meanwhile, earnings surged 7%.
And more gains could be in store for MCD thanks to McDonald’s big buyout of Israel’s Dynamic Yield. The firm’s software is being used to change its menu displays and offer recommendations based on the time of day, weather, restaurant traffic and trending items. So far, the initial test with the software has been a real success and MCD is planning on rolling it out nationwide.
Looking out further, MCD’s could use Dynamic Yield’s software to offer a truly personalized experience when coupled with self-ordering kiosks, its app and rewards programs.
In the end, the focus McDonald’s has had recently has made it sound similar to many tech stocks. And the firm also has the growth behind it to be considered a tech stock in disguise.
Pulling the perfect espresso shot is an art form. Equally artistic is getting people to pay $6 for that shot of coffee and some milk. But coffeehouse Starbucks (NASDAQ:SBUX) is doing just that and the key has been its transformation into a tech stock.
A few years ago, SBUX unveiled its rewards program and its mobile app. This alone helped drive sales and repeat traffic. But lately, its efforts to ramp up the app/rewards program has become the foundation of its new digital flywheel program. Here, SBUX is moving to a new cloud-based system that allows for more personalization, rewards, payment and ordering options. Through its new tech investments and upgraded A.I.-based applications, Starbucks will be able to update rewards programs in real-time to target subsets of customers. The idea is that consumers can keep the “wheel” going as they are rewarded. In turn, they spend more, get more personalized rewards, etc.
Moreover, the next phase of its integration will be connecting inventory and point-of-sale systems together to reduce costs and waste. Starbucks also recently took a stake in Brightloom — a firm that develops software for mobile orders and delivery.
And its efforts seem to be working. During its last earnings report, SBUX mentioned that 42% of tender occurred via its digital operations. And during its latest conference call, CEO Kevin Johnson mentioned that these digital efforts contributed two percentage points to its 6% same-store sales growth in the U.S. during the quarter. The best part is that the number of rewards members continue to grow. SBUX saw 12% and 13% membership growth in the last two quarters.
As you can see tech is really working for SBUX and firm digital ambitions make a force in the sector.
Domino’s Pizza (DPZ)
Domino’s Pizza (NYSE:DPZ) could be the restaurant to thank for the many of them acting like tech stocks. Back in 2007, DPZ was one of the first restaurants to offer online ordering and it was one of the first to launch an iPhone app. It has since built upon those beginnings and unveiled its AnyWare technology suite.
AnyWare allows customers to order a pizza from 15 different methods, including their phone, Facebook’s (NYSE:FB) Messenger app, Amazon (NASDAQ:AMZN) Alexa devices and even Slack (NASDAQ:WORK) while at the office. Moreover, to appeal to millennial and younger consumers, they’ve “gamified” the ordering process with badges, virtual pizza builders and its now-famous order tracker bar.
The moves have paid off — with more than two-thirds of its sales starting from digital ordering channels.
But Domino’s isn’t done with tech. Its next step is to improve the delivery of pizza. It has unveiled new “Hot Spots”, such as beaches, parks and other public locations, that consumers can have their food delivered to. Again, Hot Spots are integrated into its AnyWare suite.
DPZ is taking delivery one step further and has invested in autonomous vehicle tech through a series of partnerships. Soon, a robot or self-driving car may be dropping off your pizza and breadsticks. This is all possible thanks to its fortressing strategy. Like AMZN with its massive fulfillment center network, DPZ is working on building out a massive portfolio of stores. The hope is to cut down on delivery times and make automated delivery possible.
It’s no wonder why management at DPZ considers itself an “eCommerce company that just happens to sell pizzas.” With that, Domino’s remains one of the best tech stocks to buy today.