Speed is helping fuel fast casual restaurants: Analyst

Key Points
  • The winning recipe in the restaurant space may be companies that have mastered the art of speed.
  • "This has really become the blueprint of the restaurant space," says restaurant analyst R.J. Hottovy.
  • Stocks of Darden Restaurants and Chipotle Mexican Grill are up as they capitalize on this trend.
Inside Spacious, a co-working service that operates out of New York restaurants.
Andrew Frasz | Spacious

It's all about speed in today's restaurant industry. And companies such as Chipotle and Darden Restaurants might have the winning recipe: simplified operations, quick, convenient service and order accuracy.

"This has really become the blueprint of the restaurant space," Morningstar restaurant analyst R.J. Hottovy told CNBC on "Power Lunch" on Thursday.

Darden Restaurants, which owns fast casual brands such as Olive Garden and LongHorn Steakhouse, beat earnings estimates Thursday, sending company shares soaring. The stock was up 13.5 percent during intraday trading.

A Darden Restaurants Inc. Olive Garden location in Reno, Nevada, U.S.
David Paul Morris | Bloomberg | Getty Images

In addition, the company has "figured out how to build a very successful take-out menu," said Hottovy.

Shares of competitor Chipotle Mexican Grill are also up year to date. In fact, the company is making a comeback after a three-year-long sales slump fueled by a series of food-borne illness outbreaks and bad reviews. Earlier this year, the company began capitalizing on speed by allowing customers to order on an app and pick up the food at a drive-through window.

Chipotle is testing new potential items for its menu this week.

"The speed of service is something the company is squarely focused on right now," Hottovy said.

Chipotle restaurant workers fill orders for customers on April 27, 2015 in Miami.
Joe Raedle | Getty Images

Restaurants that take advantage of add-on menus, or low-priced items that diners can order as part of a larger meal, have been most successful, the analyst said.

"You still have a low base price, but people come in and buy other things as well," Hottovy said.

Still, Morningstar placed a hold rating on both Chipotle and Darden and said the companies could benefit from better workforce training, new products and improved order of operations.

"There's a lot of excitement that comes from [stocks surging], but you have to balance that with ... some tempered margin expectations," Hottovy said.