Here's what we’re looking for this earnings season

What will it take for the fast-food sector to regain its momentum?

Restaurant earnings season has begun in earnest, thanks to Domino’s third-quarter report last week. But it picks up steam next week, when chains like Chipotle and Wingstop issue their quarterly updates.

We’ll be paying especially close attention to the quick-service sector, which has a lot to prove.

It has been the worst-performing sector so far this year, and last quarter doesn’t look much better, judging by the 2.6% traffic decline in the period, according to Revenue Management Solutions.

Several chains in the sector are struggling with sluggish sales and traffic. McDonald’s expects its same-store sales to be down in the third quarter. Wendy’s will likely report another period of negative results. And at least one of the sector’s outperformers, Taco Bell, will likely report muted results, at best, given the impact of cyclospora.

There is a general sense of pessimism among executives in the sector as to near-term improvement. There are just too many issues working against traditional fast-food restaurants right now.

Can anything reverse the traffic challenges? Can easing gas prices help? Or is the sector bound for a multi-year traffic problem?

Here’s what else we’re watching this coming earnings season.

Much of the talk this year has centered around Burger King, which last quarter outperformed the average of its three biggest rivals, McDonald’s, Wendy’s, and Jack in the Box, by more than 1,100 basis points. As far as we know, Burger King has never done that.

The company has outperformed its rivals largely by focusing on the basics. It has improved operations in the restaurants, upgraded its Whopper, upgraded its chicken nuggets, and is now getting the benefit of strong marketing.

But as noted above, this remains a tough market, and even strong performing companies are not immune. All the signs, however, suggest Burger King continuing its comeback.

> OK. Restaurant earnings season starts with Domino's next week. Here are some of the same-store sales results from a year ago that they'll be comparing themselves against, so you know who has tough comparisons and who has easy comps. And who really, really should be doing positive numbers. Tough comps: Chili's 21.4% Black Rock Coffee Bar 10.8% First Watch 7.1% Taco Bell 7% Texas Roadhouse 6.1% Longhorn Steakhouse 5.9% Dutch Bros 5.7% Domino's 5.2% OK comps: Shake Shack 4.9% Olive Garden 4.7% Carrabba's 4.1% Noodles 4% Burger King 3.2% Applebee's 3.1% McDonald's 2.4% Cava 1.9% Habit 1% BJ's 0.5% Outback Steakhouse 0.4% Chipotle 0.3% Starbucks 0% Easy comps: El Pollo Loco -0.8% Portillo's -0.8% Red Robin -1.2% Popeyes -2% Papa Johns -3% Dave & Buster's -4% Wendy's -4.7% Cracker Barrel -4.7% Wingstop -5.6% Really easy comps: Maggiano's -6.4% Jack in the Box -7.4% Sweetgreen -9.5%— Jonathan Maze (@jonathanmaze) October 9, 2026

Consumers seem to be rediscovering their love of dining at sit-down restaurants. We already know independent restaurants are doing well – reservations are up 11% this year, according to Open Table – and full-service chains outperformed limited-service brands among the publicly traded set last quarter.

Chili’s in recent years has carried that group, but more recently it has had help from the likes of Cheesecake Factory, BJ’s Restaurants, and others.

The full-service sector still has some challenges, to say the least. But it also has an advantage, in that people with higher incomes are still spending, and thus are not trading down to fast-food restaurants as they’d done during recessions in the past.

Taco Bell has had one negative quarter since 2016, and that quarter was during the worst depths of the pandemic.

That appears likely to change when Yum Brands reports earnings early next month, thanks to the unfortunate impact of the cyclospora outbreak. How much its same-store sales are down will play a major role in how quickly it recovers.

Nobody doubts that Taco Bell can recover. It’s Taco Bell for crying out loud. But it would also represent a remarkably rare blip on the Mexican chain’s stellar track record.

And as a side note, this will be the first earnings period since Yum sold Pizza Hut, meaning that its stock performance will hinge even more on a recovery with its biggest domestic operation.

Not all that long ago we could have said similar things about Chipotle that we did Taco Bell. The fast-casual burrito bowl chain had a strong track record since its sluggish recovery from its E. coli incident before the pandemic.

The chain’s same-store sales have improved recently, but the second quarter’s 2.2% growth was its best in six quarters, half of which were negative. Before that, outside of the pandemic-filled first half of 2020, you have to go all the way back to 2018 to find Chipotle’s same-store sales of less than 4.4%.

Chipotle’s business model is dependent upon strong sales generating enormous profits at individual restaurants, which makes its expansion a no-brainer because the company makes a quick return on its investments. It’s one of the best growth stories the industry has ever seen.

The weaker sales suggest the company is shifting into a more modest growth period. That has led to a rethinking of its valuation. Chipotle’s stock has lost nearly half its value over the past two years, enough that it was actually speculated as a potential takeover target.

Better sales will help call off the dogs.