Dining out may have gained popularity during the post-lockdown recovery, but based on recent data, the American public may be losing some of its appetite for fast food, fast casual, and other dining establishments. This leaves restaurant stocks at risk of declining in price.

Stocks in this sector have already been squeezed by factors like high inflation. During 2022 and 2023, the popularity of dining out stayed strong despite higher prices and smaller portions, but with U.S. economic growth slowing down, it’s not surprising that dining demand is finally slowing down as well.

Yes, some restaurant chains appear to be still thriving, despite the challenges. However, among the dozens of publicly-traded restaurant stocks, quite a few appear to be experiencing issues with declining same-store sales and downbeat outlook.

Let’s take a look at seven restaurant stocks at risk, and see whether they’re still worthy of a buy, despite this major headwind.

Cracker Barrel Old Country Store (CBRL)

For quite some time, Cracker Barrel Old Country Store (NASDAQ:CBRL) has been dealing with a slump in customer traffic. Starting in 2023, the chain, best known for its down-home cuisine and kitschy decor, began to experience a decline in same-store sales.

So far this year, declines have persisted. Cracker Barrel CEO Julie Felss Masino has admitted that the company faces a long road ahead when it comes to a comeback. Yet while all of this hardly sounds bullish for CBRL stock, today’s troubles may already be baked into its valuation, especially after CBRL’s latest sharp pullback.

On May 17, shares declined by double-digits, following news of the company slashing its dividend by 80% to fund its turnaround. While it may take years to happen, if a turnaround is successful, and CBRL’s annual earnings climb back above $10 per share, chances are it would at least double from current prices.

Denny’s (DENN)

Although already down by more than 25% year-to-date, Denny’s (NASDAQ:DENN) remains one of the restaurant stocks at risk of additional drops in price. As seen in the its latest quarterly earnings release, the diner chain reported declining sales at both company-owned and franchised locations.

While net income was up year-over-year, taking into account a one-time accounting adjustment in the prior year’s quarters, adjusted net income per share dipped by around 15.4%, from 13 to 11 cents per share. The company may be guiding for same-store sales to hold steady for the full year 2024, but if overall dining demand keeps trending lower, Denny’s may have to make a downward revision to this guidance.

Even worse, factors like labor inflation could eat further into the company’s profitability. This may mean lower earnings per share than currently anticipated, which in turn would likely place even more pressure on DENN stock.

Dine Brands Global (DIN)

Dine Brands Global (NYSE:DIN) is the parent company of Applebee’s and IHOP. Earlier this month, the restaurant operator reported its results for the quarter ending March 31, 2024. For the quarter, Dine Brands reported declining domestic same restaurant sales.

IHOP sales fell by 1.7% year-over-year. Applebee’s sales fell by 4.6%, an even greater amount. As a company in an industry with high fixed costs, these single-digit sales declines resulted in a sharp 35% drop in GAAP earnings compared to Q1 2023.

Although guidance suggests more challenges ahead, if you’re looking to make a contrarian wager on a comeback in dining out demand, DIN stock could be the perfect vehicle. Shares trade at a super low 7.4 times forward earnings. If demand picks back up, and the company’s decision to grow IHOP and shrink Applebee’s ultimately pays off, there could be big upside potential for shares.

Darden Restaurants (DRI)

Darden Restaurants (NYSE:DRI) is best known for being the owner of Olive Garden. However, the full-service restaurant operator has many other chains in its portfolio, including Ruth’s Chris Steak House and LongHorn Steakhouse.

Even so, Darden hasn’t been immune to the aforementioned change in dining trends. During the company’s fiscal third quarter (ending Feb. 25, 2024), only LongHorn reported same-store sales growth. The other chains reported year-over-year declines. Since the release of these numbers in March, DRI stock has been trending lower.

Trading for 17 times forward earnings, shares do look pricey given the challenges. Still, as Seeking Alpha commentator Chuck Walston pointed out last month, Darden’s pivot towards high end dining, plus its scale advantages, may help to outweigh the impact of declining sales at its fast casual chains. Also, as I pointed out recently, Darden’s aggressive repurchasing of shares could help provide a lift as well.

First Watch Restaurant Group (FWRG)

First Watch Restaurant Group (NASDAQ:FWRG) operates a chain of breakfast-focused casual dining establishments. In recent years, First Watch has reported strong growth, with current sales more than double where they were before the pandemic.

However, while waning restaurant demand may not be driving declining sales for the chain, it may be starting to hinder First Watch’s growth. Last quarter, same store sales growth came in at just 0.5%. Overall revenue may have increased by 14.7%, but this top line result fell short of analyst expectations.

Concerned about a growth slowdown, investors have bid down FWRG stock in recent weeks. Trading for $25 per share before the revenue miss, shares now trade for just over $19 per share. With the stock trading for a rich 45.7 times forward earnings, further indication of a slowdown may result in a sharp de-rating to the downside for FWRG.

Jack in the Box (JACK)

Besides its namesake fast food chain, Jack in the Box (NASDAQ:JACK) also owns Del Taco, another west coast fast food chain. Unfortunately, this high west-coast exposure means high exposure to an industry headwind specific to the region.

That would be California’s recent minimum wage increase for fast food workers to $20 per hour. Higher wages of course mean higher prices for the company’s menu items across its two chains. Both Jack and Del Taco reported declining same stores sales for the preceding fiscal quarter.

However, declines could get worse. The minimum wage increase didn’t kick in until the tail end of last quarter. JACK stock trades for just 8.7 times forward earnings. This suggests that uncertainty related to the wage hike is priced-in. Even so, it may be safer to consider JACK one of the restaurant stocks at risk, and stay away until at least the quarterly earnings release.

Papa John’s International (PZZA)

Papa John’s International (NASDAQ:PZZA) is yet another restaurant company reporting weak results as of late. On May 9, the Louisville, Kentucky-based pizza restaurant operator reported declining same store sales during the preceding quarter, driven by weakness in the North American market.

Although Papa John’s International (emphasis on the “international”) is reporting same store sales weakness in non-U.S. markets, overseas expansion is helping to partially outweigh this weakness. Irrespective of where Papa John’s is struggling however, what’s most of interest to investors is whether to buy the recent dip in PZZA stock.

Since March, PZZA has fallen from the low-$70s to the low-$50s per share. Yes, recent results aren’t exactly promising. The stock is quite pricey compared to other hard-hit restaurant stocks. Shares trade for 21.7 times forward earnings. Still, as InvestorPlace’s Rick Orford recently pointed out, analysts are bullish about a possible comeback.

On the date of publication, Thomas Niel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.