It’s never been easier to get a great burger at your corner chain. While Shake Shack (NYSE:SHAK) and Habit Restaurants (NASDAQ:HABT) — parent of Habit Burger Grill — are still both very young companies with small footprints, they both aspire to hold solid niches across the country in the coming decade. They want to be the ones serving you your burgers.
But the restaurant business can be brutal: there’s nothing one outfit can offer that another can’t immediately copy. That’s what makes these two chains so unique — they experienced enough success to become publicly traded entities and start rapid expansion.
So which stock is the better buy today? That’s impossible to answer with 100% certainty. But we can get a better idea for what we get when we buy shares by evaluating these companies on three different continuums. Let’s see how they stack up.
Sustainable competitive advantages
There’s nothing more important to restaurants than scale and brand power — as I mentioned above, there’s nothing to prevent one chain from out-and-out copying exactly what another chain does. By having a large scale, management can squeeze out more profitability. It can also create more brand awareness, which is the other key differentiator when it comes to restaurant chains. People like to know what they’re getting before deciding on a restaurant, and the strength of a brand plays into that decision.
Shake Shack made its name in New York City, while Habit spent most of its life as a family run outfit in California. The former currently has 127 “Shacks” open, while the latter has 178 locations up and running. That means they are more or less on the same scale right now.
When it comes to brand value, it is difficult to differentiate between the two: because they are both so small, most major brand evaluators overlook them. So I’ll move to a critical restaurant industry metric to…