We are a nation on the go.

Whether it's drive-up ATM's, movie rental drop boxes, curbside dry-cleaning pickup, or self-checkout lanes at the local grocery store, most of us naturally gravitate to time-saving alternatives that add a few minutes back to our day. And if these options also happen to be cost-efficient, then that's even better.

In this type of environment, is it any wonder that in-and-out restaurants like McDonald's stay packed with customers at all hours of the day? We all know that fast-food joints always have plenty to offer for a reasonable price, but can the same be said of the companies that operate them?

Let's ease up to the counter and take a look around.

The Early Days
It is difficult to say exactly where the fast-food business was born, but many people point to Wichita, Kansas, where the first White Castle opened in 1921 -- selling hamburgers for just a nickel each. Twenty years later, it was joined by McDonald's, which had a humble beginning as a local barbecue stand operated by two brothers, who would soon discover that there was much more money to be made in burgers and fries.

Ray Kroc would later buy the business and forever alter the fast-food landscape. As a pioneer with a vision, he expanded the McDonald's brand quickly from city to city, opening 200 outlets by 1960. From the beginning, Kroc was driven by efficiency, and always imposed the highest quality control standards -- turning the process of making quick, ready-to-eat meals into an art form.

However, there is always room for improvement, and in 1971 Wendy's founder Dave Thomas put a clever new idea into use -- the "drive-thru" window. Suddenly, consumers in search of a quick bite to eat didn't even have to leave their cars. At the time, the idea of fast food was still catching on in some places, but the industry was already generating $6 billion in annual sales. 

Of course, there have been numerous advancements since then, in terms of standardization, food preparation and menu enhancements. Meanwhile, dual-working families have become increasingly prevalent, which has left less time for household cooking -- fueling even more visits to local eateries.

In the 15-year period from 1982 to 1997, fast-food sales marched ahead at a +6.8% annual clip, versus just +4.7% for table service restaurants -- thereby increasing its market share from 29% to 34%. At that point, industry sales had reached $110 billion, and they would soon surpass traditional restaurant revenues for the first time ever.

In the decade since, thousands more fast-food outlets have dotted the country, store traffic has steadily risen, and growth into foreign markets has been nothing short of explosive. According to the National Restaurant Association, Americans spent approximately $140 billion at quick-service restaurants last year. That figure represents roughly 50% of the total amount spent at restaurants nationwide -- up from just 25% in 1955.

Like a slow-moving but powerful train, we see very little that can stand in the way of this trend going forward.

Billions and Billions Earned
Today, the hamburger is still a staple, and nearly three-fourths of all hamburgers consumed nationwide are purchased at fast-food outlets. However, as the table below shows, the amount of money spent in other categories isn't exactly pocket change.

The Investment Perspective
Like almost any other industry, investing in fast-food companies has its advantages and disadvantages.

On the downside, price wars are common, barriers to entry are non-existent, and competition is fierce -- not only from other quick-service rivals, but also from casual dining chains like Olive Garden and Applebee's. Plus, public relations backlash from unforeseen incidents (such as the e-coli outbreak at Jack-in-the Box) can scare away customers.

On the plus side, however, investors can often disregard some of the concerns that might plague other stocks. Interest rate movements are seldom a cause for alarm, for instance, and there is no need to worry that disruptive technological advancements will suddenly render the hamburger obsolete. Rain or shine, Americans are going to continue eating at fast-food outlets.

When analyzing companies in the quick-service restaurant industry, it's important to note that as a firm's store base grows larger and larger, the impact of expansion grows smaller and smaller -- making same-store sales (or comps) at existing locations increasingly important. Therefore, when searching for a favorite, we prefer companies that have shown an ability to keep comps moving forward, and are likely to continue doing so in the years ahead.

And though true economic moats can be hard to come by in this sector, we also look for chains that have a competitive edge and a differentiated product that sets them apart from the largely homogeneous crowd. And, as always, we rule out those companies trading at hefty premiums to our estimated fair value.

With that in mind, the table below contains five of the most attractive players in the quick-service restaurant industry...

Important Note: Throughout the remainder of this article, editor Nathan Slaughter and our research staff provide a list of the five most promising fast-food stocks. In addition, they also provide an in-depth look at their favorite stock in the category. However, in order to view the remainder of this article, you'll need to subscribe to our premium newsletter -- Half-Priced Stocks. After you subscribe, you'll receive immediate access to this full article, as well as our monthly Half-Priced Stocks newsletter and a host of additional premium content. Please visit one of the following links to continue. . .

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