Ms. Rothman: We continue to encourage our clients to remain defensively positioned and focus on those companies which have what we consider to be the four key differentiators in a downturn. Those are a high degree of franchising, high degree of real estate ownership, economies of scale in purchasing and advertising, and strong demand trends or pricing power. That would leave our top pick as McDonald's. And for those investors looking for something with more leverage to the upside in the cycle, we are recommending Brinker, owner of Chili's.
TWST: The one that strikes me is pricing power. That's a tough thing to come by these days, isn't it?
Ms. Rothman: It is. I think the truest measure of demand and a chain's competitive positioning is the degree to which you have positive traffic. We only have two companies currently that are reporting positive traffic: Panera Bread and McDonald's.
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