Casual Dining Stocks Are Having a Good Year. How to Play the Trend.

In August, casual-dining traffic improved from a year earlier for the first time in 10 months, even as overall restaurant traffic fell. (Charly Triballeau /AFP via Getty Images)

Key Points

• Full-service restaurants accounted for 50.9% of restaurant spending in June, up about 0.4 percentage point from a year earlier.
• In August, casual-dining traffic improved from a year earlier for the first time in 10 months, even as overall restaurant traffic fell.
• Cheesecake Factory uses frequent menu updates, a wide range of price points and generous portions to reinforce value.

Diners don’t necessarily want a meal that’s cheap. They want one that’s worth paying for.

And that’s why casual dining restaurant stocks are doing better than fast-food chains.

Cheesecake Factory stock has surged 97% this year and BJ’s Restaurants is up 55%, while Brinker International and Bloomin’ Brands are up 40% and 37%, respectively.

Full-service restaurants accounted for 50.9% of restaurant spending in June, up about 0.4 percentage point from a year earlier, according to Census Bureau data analyzed by Wells Fargo. In August, casual-dining traffic improved from a year earlier for the first time in 10 months, even as overall restaurant traffic fell.

Consumers haven’t suddenly become flush. Gasoline prices are high and food inflation hasn’t disappeared.

But value increasingly means more than price alone. Portion size, food quality, service and atmosphere can make a somewhat more expensive sit-down meal feel like better value than a cheaper fast-food order.

Chili’s may be the clearest example. Comparable sales rose 5.6% in the latest quarter, with traffic improving 1.5%, following five consecutive years of same-store sales growth. Management at Brinker, its parent company, credits better food, restaurant upgrades, everyday value and stronger advertising. The chain’s Big Crispy chicken sandwich has emerged as a traffic driver, while app usage are more than 40% above levels from two years ago, according to Wells Fargo.

Cheesecake Factory uses frequent menu updates, a wide range of price points and generous portions to reinforce value. The company rolled out lower-priced Bowls & Bites, and used its rewards program and active social-media marketing to get those products in front of customers. Management says the bites are often added to an order rather than substituted for an entree.

The latest quarter showed genuine demand: Cheesecake Factory’s comparable sales rose 5.8%, including a 2.7% increase in traffic. Revenue grew nearly 8% and adjusted earnings per share jumped 24%. Wells Fargo expects comparable-sales growth to accelerate to roughly 10% this quarter and reach about 7% for the full fiscal year.

BJ’s is also benefiting from actual customer growth rather than price alone. Guest traffic jumped 8.3% in its latest quarter, its eighth consecutive quarter of traffic gains. Darden’s traffic rose more modestly, about 1.3%, but LongHorn Steakhouse—one of the company’s flagship chain brands—stood out with a 4.2% traffic increase.

After this year’s rally, the group is no longer obviously cheap.

Wells Fargo analysts led by Zachary Fadem notes that Brinker International , Cheesecake Factory, and Darden Restaurants are all trading above their five-year average price/earnings multiples. But there is a valuation gap within the group, and some opportunities worth checking out.

Cheesecake Factory and BJ’s both trade above 20 times forward earnings. Wells Fargo says much of Cheesecake Factory’s improvement is already reflected in stock prices. Brinker, by contrast, trades closer to 15 times despite strong traffic trends, leaving more potential for a higher valuation if Chili’s can translate customer growth into new restaurant openings.

Bloomin’ Brands offers a more speculative opportunity. Despite 2026’s rally, the stock is more than 70% down from its 2024 peak, trading at eight times forward earrings—a steep discount to many casual-dining peers. Investors are still waiting for evidence that the turnaround of its Outback Steakhouse chain can produce sustainable traffic growth.

Outback’s comparable sales have improved, but higher spending per customer has done much of the work: Traffic was still down nearly 3% last quarter. That makes high beef prices particularly difficult to absorb, since raising prices further could discourage more customers from visiting. Bloomin’ says beef inflation is running in the high single digits this year.

Still, Darden’s LongHorn shows what can be accomplished under the same commodity pressure: Traffic rose 4.2% last quarter despite higher prices. Management says years of investment in steak quality and service have strengthened the brand—and, with supermarket beef prices also elevated, eating a steak at LongHorn can actually look attractive to consumers.

The next leg of the casual-dining rally probably won’t come simply because Americans eat out more. It will depend on which chains can keep convincing selective consumers that spending a few extra dollars buys something meaningfully better—and turn those visits into lasting earnings growth.

Write to Evie Liu at evie.liu@barrons.com

Copyright ©2026 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8