The restaurant industry is likely to have benefited from a gradual improvement in demand, robust off-premise sales, sales-building efforts and digital initiatives. The companies are also likely to have witnessed a sequential increase in traffic. However, higher cost of employee wages, benefits and insurance, and other operating costs, such as rent and traffic continue to hurt the industry.

Restaurant operators’ focus on digital innovation, sales-building endeavors and cost-saving moves has been acting as a catalyst for a while. With the growing influence of the Internet, digital innovation became the need of the hour. Restaurant operators are constantly partnering with delivery channels and digital platforms to drive incremental sales. Partnerships with delivery channels like DoorDash, Grubhub, Postmates and Uber Eats and the rollout of self-service kiosks and loyalty programs continue to drive growth. The restaurant operators are focusing on driverless delivery systems to augment sales amid the coronavirus crisis. This is anticipated to reduce expenses substantially and ensure safety amid the pandemic as it does away with delivery personnel.

The restaurant operators are grappling with the escalated cost of operations. Intense competition, high wages and food cost inflation remain concerns. The industry is persistently bearing steep expenses, which have been affecting margins of late. Higher pre-opening costs, marketing expenses and costs related to sales-boosting initiatives are weighing on the companies margins. The rise in meat and seafood costs, including ribs, prime rib, ribeye and tri-tip, and salmon, is hurting the industry.

Sneak Peek of Upcoming Earnings Releases

Let’s focus on a few restaurant companies scheduled to release second-quarter 2022 earnings this week.

According to the Zacks model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

McDonald's Corporation (MCD Quick QuoteMCD - Free Report) is scheduled to report second-quarter 2022 results before the opening bell, on July 26. In the last reported quarter, MCD delivered an earnings surprise of 4.6%.

McDonald's second-quarter performance is likely to have benefited from digital efforts, strong marketing campaigns, robust drive-thru presence and expansion initiatives. Besides, solid enrolment and participation in the loyalty program, frequent visits from loyalty customers (driven by loyalty usage and app-exclusive promotions) and increased app adoption are likely to have aided MCD’s performance in the to-be-reported quarter.

MCD’s June-quarter top line is likely to reflect an improvement in comps results on average check growth, menu price increases and compelling value programs. On the previous quarter’s earnings call, McDonald's mentioned witnessing positive comps growth in the United States, Japan and Latin America. With heightened digital engagement and strong menu initiatives, the momentum is likely to have continued in the second quarter as well.

However, coronavirus-induced labor shortages, supply-chain delays and geopolitical tensions are likely to have affected MCD’s operations in the second quarter. Additionally, rising consumer inflation levels are likely to have stressed margins in the to-be-reported quarter. (Read more: McDonald's to Post Q2 Earnings: What's in the Cards?)

MCD currently has a Zacks Rank #3 and an Earnings ESP of +3.13%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Chipotle Mexican Grill, Inc. (CMG Quick QuoteCMG - Free Report) is scheduled to report second-quarter 2022 results on July 26, after the closing bell. In the last reported quarter, CMG delivered an earnings surprise of 1.2%.

Chipotle's second-quarter performance is likely to have benefited from robust comps growth, introduction of menu items and an intensified focus on Chipotlane. For 2022, CMG expects comps growth in the range of 10-12%.

CMG is also gaining from the expansion of its digital programs. Management is leaving no stone unturned to make digital ordering more efficient for its restaurants and more appealing to customers, aiming to retain them amid the coronavirus crisis. In this regard, Chipotle redesigned and simplified its online ordering site, enabled online payment for catering and online meal customizations, and collaborated with several well-known third-party providers for delivery.

The Zacks Consensus Estimate for food and beverage revenues is pegged at $2.2 billion, up 19.1% from the year-ago reported number. The consensus estimate for delivery revenues stands at $23.7 million, indicating growth from $23.2 billion reported in the prior-year quarter.

However, wage inflation and costs associated with beef, avocado and paper are likely to have weighed on margins in the second quarter. Chipotle anticipates labor costs in the mid-24% range because of leverage from menu price increases and seasonally higher sales. (Read more: Robust Comps Growth to Aid Chipotle's Q2 Earnings)

CMG has a Zacks Rank of 3 and an Earnings ESP of +0.51%.

Yum China Holdings, Inc. (YUMC Quick QuoteYUMC - Free Report) is scheduled to report second-quarter 2022 results on July 28, after the closing bell. In the last reported quarter, YUMC delivered an earnings surprise of 1.2%.

Yum China’s results for second-quarter 2022 are likely to have been negatively impacted by dismal traffic, high costs and a decline in same-store sales. Yum China is enduring the structural high cost of labor and rentals. Apart from wage inflation, YUMC is incurring additional costs, stemming from promotion, packaging upgrades, menu innovation and technological novelty.

YUMC has a Zacks Rank of 3 and an Earnings ESP of 0.00%.

Noodles & Company (NDLS Quick QuoteNDLS - Free Report) is slated to release second-quarter 2022 results on July 27, after the closing bell. In the last reported quarter, NDLS’s earnings surpassed the Zacks Consensus Estimate by 23.5%.

NDLS has an Earnings ESP of -28.57% and a Zacks Rank #4 (Sell) at present. Noodles & Company’s earnings and revenues are likely to have witnessed a decline of 30% and growth of 3.6%, respectively, from the corresponding year-ago quarter’s results.

Wingstop Inc. (WING Quick QuoteWING - Free Report) is slated to release second-quarter 2022 results on July 28, after the closing bell. In the last reported quarter, WING’s earnings surpassed the Zacks Consensus Estimate by 23.5%.

Wingstop presently has an Earnings ESP of -4.90% and a Zacks Rank of 3. WING’s earnings and revenues are likely to have witnessed a decline of 7.9% and growth of 14.3% each, from the respective prior-year quarter’s actuals.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.