McDonald's stock was listed in 1965. Investors who bought 100 shares back then worth less than $2,300 are now sitting on an investment worth more than $3.3 million. Meanwhile, McDonald's has expanded from that single California location to more than 31,000 restaurants in 118 countries.

McDonald's is now a mature company and its growth potential isn't what it used to be. The U.S. market is already saturated with McDonald's locations -- there are limited opportunities to open new restaurants without poaching sales from existing locations.

But there are a host of other restaurants out there employing the same basic model McDonald's followed to grow. Specifically, if a chain can identify a popular concept or niche such as a particular food style or atmosphere, that chain has the opportunity to expand rapidly into new markets, just as McDonald's has over the past 50 years.

Some of the best restaurant chains are also finding they do not need to limit their business to the U.S. market -- rapid growth in restaurant spending abroad offers an opportunity to expand overseas. In China, for example, analysts estimate that spending on dining out is rising at an annualized pace of more than +13%; the average Chinese consumer now dines out three times per week.
 

And restaurant chains also benefit from some additional tailwinds -- rapid growth in spending on food away from home. According to the U.S. Bureau of Labor Statistics, the average American spends a little under 11% of his/her total annual after-tax income on food. In

recent years, the amount of cash spent on dining out has been increasing at a faster pace than total food expenditures. Our chart shows spending by the average consumer on food away from home going back to 1984.

Consumer spending on food has more than doubled from $1,320 in 1984 to nearly $2,700 today. Spending has accelerated at a particularly rapid pace since the mid-1990s. In fact, growth has accelerated from an annualized pace of about +2.6% from 1984 through 1994 to about +3.9% annualized since then.

Even better, the restaurant business is relatively defensive during economic downturns because dining out is one of the last areas of expenditure consumers cut back on. Consider that during the last U.S. economic slowdown from 2001-2003, consumer spending on food away from home only dropped for one year and quickly hit a new all-time high in 2004.

In the table below, my staff and I list of some of the most promising restaurant chains publicly traded in the U.S. and offer in-depth analysis of two companies we think could be the next McDonald's. 

Important Note: In the remainder of this article, StreetAuthority Market Advisor editor Paul Tracy provides a list of over 30 of the top-performing restaurant chains on the market, but he whittles it down to just two of the most promising. In his extensive profiles of both, he states all the reasons why you should own these amazing growth plays, each with long-term earnings growth of at least +19%. However, in order to view the remainder of this article, you'll need to subscribe to our premium investing newsletter -- Market Advisor. After you subscribe, you'll receive immediate access to this full article, as well as our monthly Market Advisor newsletter and a host of additional premium content. Please visit one of the following links to continue. . . 

-- Paul Tracy
Editor
StreetAuthority Market Advisor

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