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It might be the industry you'd least expect, with the economy doing as well as it is. But the restaurant sector is in deep trouble.
Just look at the list of names that filed for bankruptcy in 2019: one of the largest Applebees' franchisees, RMH Franchise Holdings; Kona Grill; Bertucci's Holdings; Perkins Restaurant and Bakery; and Houlihan's. And that's with unemployment at a record low and consumer confidence close to a 20-year high.
It turns out there's an explanation for the recent struggles. And it's a bad sign for restaurant stocks across the board.
Fortunately, we can turn that into triple-digit profits by following a simple options trading strategy.
Here's what's going on - and how you can double your money on it...
Restaurant Stocks Are Being Disrupted
If you read the recent bankruptcy filings for these restaurants, you start to see a theme. They are citing third-party delivery services as a business headwind.
Firms like GrubHub Inc. (NYSE: GRUB), Uber Technologies Inc.'s (NYSE: UBER) UberEats, and DoorDash, among a slew of delivery startups, are eating into brick-and-mortar restaurant profits.
You might think these companies would help boost restaurant sales, but in reality, they are turning into an obstacle. Not only do they make it easy for potential customers to stay home, but they charge fees to the restaurants for offering the service.
Only 34% of customers between 34 and 54 say they are likely to dine out often, down from 41% in 2007. That's bad news for restaurants, since customers dining at home can't stay for a few rounds at the bar or decide to add a dessert after their meal. This lowers the average ticket price for the restaurant.
On top of that, delivery services charge restaurants a fee to offer their services. The average commission for an order placed through GrubHub can be as high as 15%. And that doesn't even include fees for reservation services like OpenTable, Yelp, and more.
For an industry with notoriously thin margins - the average is around 4% - this double blow could be the difference between profitability and bankruptcy.
It also means restaurants affected by this trend are walking on thin ice.
And we've found one that isn't just walking on thin ice, it's like driving a tank across thin ice.
Once the ice cracks, you could double your money by using this trading strategy.
The best part is you don't have to short the stock or take any unnecessary risk...