Domino's stock appears cheaper and better positioned for growth in 2026 than McDonald's amid inflation pressures on the restaurant industry

The restaurant industry has struggled over the past year due to inflation, which has increased operating costs for restaurants and raised prices for customers. Those pressures have contributed to weaker traffic and reduced revenue. Within fast food, however, some chains have performed better than others, including McDonald’s and Domino’s.

McDonald’s: revenue growth and improving same-store sales

McDonald’s reported a solid 2025. In the fourth quarter ended Dec. 31, 2025, revenue rose 10% year over year. Same-store sales increased 5.7% globally and 6.8% in the U.S., supported by lower-priced offerings that appealed to budget-conscious consumers.

Despite the operational performance, McDonald’s stock underperformed the broader market in 2025, returning about 5.4%. In 2026, the stock has been relatively flat, up around 0.5%.

Domino’s: weaker stock performance, but steadier traffic

Domino’s stock underperformed in 2025, down about 1%, and has fallen roughly 11% so far in 2026. The company’s growth outlook, though, appears stronger than its share-price performance suggests.

Domino’s increased same-store sales by 3.7% in the fourth quarter and by 3% for the full year, helping it stand out as one of the few fast-food chains to boost traffic. Revenue also rose about 6% in Q4 and 5% for the full year.

Margin pressure and supply chain offset

One factor weighing on Domino’s shares this year was a 5.4 percentage point reduction in gross margin for stores it owns, which fell to 10.1% in the past quarter. Domino’s owns about 260 stores, while the rest of its 7,000-plus locations are operated by franchisees.

At the same time, Domino’s supply chain gross margin increased slightly by 0.1 percentage points to 11.4%. The company also called for improving margins in its 2026 outlook. The supply chain gross margin reflects the food and supplies Domino’s sends to its stores.

2026 outlook: operating margin, sales growth, and operating income

Domino’s expects improvement in its overall operating margin and a 3% increase in same-store sales in 2026, according to its Q4 earnings call. The company also projected global sales growth of 6% and operating income growth of 8% in 2026.

Market share and valuation support

Domino’s is also positioned to benefit from low-cost offerings in a stagnant economy, where pizza can be a lower-cost option for families. The company is growing its leading position among pizza chains, with a market share of more than 30%.

On the earnings call, CEO Russell Weiner said Domino’s can double its retail sales in the U.S., targeting a 40% to 50% market share.

Domino’s is also supported by its valuation. The stock trades at 18 times forward earnings, lower than McDonald’s. It also has a median price target implying 33% upside.

Additionally, Berkshire Hathaway owns Domino’s stock, which has drawn attention from Warren Buffett.