Casual Dining Outlook for 2026: Insights from Evercore ISI's David Palmer

Restaurant Industry Performance in 2025

• 📉 The restaurant and food industry experienced a choppy year in 2025, with initial high hopes diminished by weak consumer sentiment and tariff costs.
• 💡 Value deals and discount campaigns have aided some brands, but many continue to face challenges.

Key Factors Influencing the Market

• 🥩 Commodity inflation, particularly beef prices, is a significant factor affecting companies like Chipotle and Texas Roadhouse.
• ⚠️ Signs of demand destruction in supermarkets may help year-end performance for some steak-focused restaurants.
• 💰 The net effect on the middle-income consumer from various economic factors will be crucial, with potential motivations to boost consumer spending by Q2 2026.

Top Picks for Casual Dining in 2026

• 🍽️ The casual dining space is favored for 2026, potentially benefiting from early tax relief and being less impacted by headwinds like GLP1s and student loan repayments that affect fast food.
• 📈 Brinker is highlighted for its strong execution and effective value positioning.
• 📊 Darden is also recommended, with its significant beef consumption making it sensitive to price fluctuations.
• 🍔 While some fast-food value players like McDonald's are noted, the primary focus remains on casual dining as a starting point for investment.