Restaurants increase convenience and give many people a place to unwind. But it’s not all sunshine and rainbows as they’re notoriously hard to run thanks to perishable ingredients, labor shortages, or volatile consumer spending. Unfortunately, these factors have spelled trouble for the industry as it has shed 3.9% over the past six months. This performance was disappointing since the S&P 500 held steady.

Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. Taking that into account, here is one restaurant stock boasting a durable advantage and two we’re swiping left on.

Two Restaurant Stocks to Sell:

Restaurant Brands (QSR)

Market Cap: $22.05 billion

Formed through a strategic merger, Restaurant Brands International (NYSE: QSR) is a multinational corporation that owns three iconic fast-food chains: Burger King, Tim Hortons, and Popeyes.

Why Is QSR Not Exciting?

1. Expenses have increased as a percentage of revenue over the last year as its operating margin fell by 2.5 percentage points
2. Performance over the past five years shows its incremental sales were less profitable, as its 4.1% annual earnings per share growth trailed its revenue gains
3. 5× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly

Restaurant Brands is trading at $67.84 per share, or 18.3x forward price-to-earnings. If you’re considering QSR for your portfolio, see our FREE research report to learn more.

Dine Brands (DIN)

Market Cap: $366.5 million

Operating a franchise model, Dine Brands (NYSE: DIN) is a casual restaurant chain that owns the Applebee’s and IHOP banners.

Why Does DIN Give Us Pause?

1. Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new restaurants
2. Earnings per share decreased by more than its revenue over the last five years, showing each sale was less profitable
3. High net-debt-to-EBITDA ratio of 6× increases the risk of forced asset sales or dilutive financing if operational performance weakens

At $24 per share, Dine Brands trades at 4.2x forward price-to-earnings. Check out our free in-depth research report to learn more about why DIN doesn’t pass our bar.

One Restaurant Stock to Buy:

Chipotle (CMG)

Market Cap: $67.86 billion

Born from a desire to offer quick meals with fresh, flavorful ingredients, Chipotle (NYSE: CMG) is a fast-food chain known for its healthy, Mexican-inspired cuisine and customizable dishes.

Why Is CMG a Good Business?

1. Offensive push to build new restaurants and attack its untapped market opportunities is backed by its same-store sales growth
2. Same-store sales growth over the past two years shows it’s successfully drawing diners into its restaurants
3. Unparalleled revenue scale of $11.31 billion gives it advantageous pricing and terms with suppliers

Chipotle’s stock price of $50.10 implies a valuation ratio of 38.1x forward price-to-earnings. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.

Stocks We Like Even More

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