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3 highly innovative restaurant stocks: Texas Roadhouse (TXRH), The Cheesecake Factory (CAKE), West Coast Ventures Group Corp. (WCVC)

The restaurant sector is changing rapidly, and brands need to adapt in order to survive. Do these companies have what it takes?

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Whether you’re a restaurant tycoon with millions in cash or a food truck operator, you need to innovate in order to attract customers and outpace the competition in a tight market. Restaurants such as Texas Roadhouse (TXRH), The Cheesecake Factory (CAKE) and West Coast Ventures Group Corp. (WCVC) are all excellent examples of companies that have found ways to stay ahead of the game.

Retaining employees drives success

While Texas Roadhouse (TXRH) celebrated its 25th anniversary of operations last year, the management and shareholders had more than one reason to pop a bottle of fine champagne. With over 585 restaurants opened and revenue rising 10.7% year-on-year in 2018 to $2.46 billion, the restaurant chain stands out as a real success story.

Texas Roadhouse stays true to the ideals behind the original concept back in 1993. Despite this, it is willing to take risks and experiment. In particular, the company has rolled out environmentally friendly takeaway boxes and a mobile app for placing orders. These are small improvements, but as CEO Wayne Kent Taylor points out, the chain prefers the affection-building experience of eating in the restaurant, more than offering extensive takeaway options.

In order to keep the restaurant chain competitive, the management makes a point of investing in its employees. Retaining top talent is essential to ensure a smooth customer experience. With turnover rates reaching three-digit numbers in the restaurant sector, Texas Roadhouse has a challenge on its hands. The company has created flexible labor schedules, driving up the satisfaction of both the employees and sirloin-hungry clients. With management turnover verging on just single digits, Texas Roadhouse possesses a strong competitive advantage over its peers.

The efforts of improving the customer experience haven’t been in vain as Texas Roadhouse scored an outstanding 83 out of 100 points on this year’s American Customer Satisfaction Index, claiming the top place. Content customers, well-cared for employees, and earnings growing by roughly 20% each year—these are factors that secure a lot of headroom to expand for Texas Roadhouse. With 25 to 30 new restaurants planned for 2019, times are never better for the company.

A winning classic

Cheesecake Factory
The Cheesecake Factory is one of the biggest casual success stories. (Photo by David onelson via Shutterstock)

Casual dining restaurants feature significantly cheaper operation costs than full-service projects, while at the same time appealing more to a younger customer base. Yet one of the biggest casual success stories is more than 40 years old. The Cheesecake Factory Incorporated (CAKE) has entered the market in 1978 and has successfully expanded to more than 200 locations.

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Recently, the company has unveiled a new fast casual dining concept in Los Angeles—the Social Monk Asian Kitchen, which is an attempt by CAKE to attract new clients through innovative initiatives. The company’s imagination does not end there; for the celebration of April Fool’s Day, it has partnered with its exclusive delivery provider, DoorDash, to give away $250,000 worth of free food. As CEO David Overton has said, “On a day where most people play pranks and make jokes, we are so pleased to offer 10,000 of our guests something that is real and meaningful.”

While sales are expected to grow at around 7% over the next five years in the sector, CAKE lags behind. Its latest financials, released January 2019, point that earnings have fallen by 37% over the year. The situation is rather grim, as shares have lost about 6.9% in March 2019 alone, putting the company’s need to innovate in stark view.

Despite questionable financial results, CAKE has once again landed on Fortune’s “100 Best Companies to Work For®” for the sixth consecutive time. Analysts believe there is a possibility that the Cheesecake Factory will grow its earnings by 7.9% every year for the next few years, but there is enough evidence to certify that the company is on a downward shift and its innovative actions might become a mere drop in the ocean.

Riding the CBD wave

Since passing the 2018 Farm Bill, the letters CBD are plastered all over the news in the U.S. CBD stands for cannabidiol, a non-psychoactive and medicinal compound found in cannabis. It has been made legal on a federal level last year, opening a whole new market to explore.

Based in Denver, Colorado, West Coast Ventures Group Corp. (WCVC) decided to make an unprecedented move and merge the fast casual restaurant concept with CBD, starting with its Illegal Burger brand.

By infusing its flagship Burger Bowl with medicinal CBD, WCVC will be able to appeal to a completely new audience. That innovative solution may just be the edge that the company needs to carve its own niche on the market.

Illegal Burger
WCVC has developed six Illegal Burger restaurants. ©Illegal Burger

So far, WCVC has developed six Illegal Burger restaurants and a full-service fresh Mexican restaurant called El Señor Sol. To further extend its outreach, WCVC has entered into a partnership with Puration (PURA), the producer of the EVERx CBD Sports Waters. With more than twice the CBD of most CBD-infused beverages on the market, the product has been selling a lot, attracting a wider audience to Illegal Burger.

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While sales of EVERx exceed expectations, WCVC prepares to launch the AmeriCanna Cafe food truck project this spring. Born in partnership with North American Cannabis Holdings, Inc. (USMJ), it will target strategic locations near most popular cannabis dispensaries in Denver.

WCVC prepares to unveil the details of its new menu on April 20th—the 420 celebration, being “the day” in the cannabis community. With an innovative Rapid Restaurant Buildout Model, that shortens the time from investment to profitability, Illegal Burger aims to expand as fast as medicinal cannabis is gaining popularity in America.

The above companies serve as a testimony that there is no single recipe for success in business. Sticking to the original ideas, staying relevant in public relations or converging different sectors can all be a path to keep up with the competition. While taking radically different approaches, all of these restaurants have the same goal—meeting the refined expectations of the contemporary client.

(Featured image by digitalreflections via Shutterstock)

DISCLAIMER: This article was written by a third party contributor and does not reflect the opinion of Born2Invest, its management, staff or its associates. Please review our disclaimer for more information.

This article may include forward-looking statements. These forward-looking statements generally are identified by the words “believe,” “project,” “estimate,” “become,” “plan,” “will,” and similar expressions. These forward-looking statements involve known and unknown risks as well as uncertainties, including those discussed in the following cautionary statements and elsewhere in this article and on this site. Although the Company may believe that its expectations are based on reasonable assumptions, the actual results that the Company may achieve may differ materially from any forward-looking statements, which reflect the opinions of the management of the Company only as of the date hereof. Additionally, please make sure to read these important disclosures.

Writing to expose the fascinating world of modern breakthroughs while feeding his endless curiosity. While separated from a keyboard, he likes to rock out with a guitar or grab a toolbox to bring his DIY imaginations into life.

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