Restaurant ETFs Compared: EATZ vs PEJ vs XLY — Exposure, Cost & Risk

As of early 2026, investors seeking exposure to the restaurant industry have primarily three ETFs under consideration, differing on focus, risk, portfolio composition, and cost structure. The core trade-off is between targeted exposure to restaurant operations versus broader consumer/entertainment sectors.

EATZ (AdvisorShares Restaurant ETF) is the only ETF focused purely on restaurant operations—restaurants, bars, fast food, catering etc. Its portfolio (>20 names) includes BJ’s Restaurants, Nathan’s Famous, US Foods, El Pollo Loco, Cheesecake Factory among its top holdings. However, its size is very small (AUM in low millions ~US$3-4 m as of late 2025), making it less liquid and more volatile. The expense ratio is high at ~0.99 %, and performance has suffered: Q3 2025 NAV fell ~9.9 %, underperforming the S&P 500, which rose ~8.1 % over the same period. Some underlying holdings show strong upside vs. analyst targets (Red Robin, ONE Group, Yum! Brands) suggesting potential value leverage in a recovery.

PEJ (Invesco Leisure & Entertainment ETF) provides ~65 % exposure to hotels, restaurants, and leisure, plus entertainment and other segments. Fees are lower (~0.57 %) than EATZ. Key restaurant-related names (Darden, Brinker, Cheesecake Factory, Dutch Bros, Shake Shack, DoorDash) appear in its holdings. Thus PEJ strikes a balance: higher exposure than XLY to restaurants, but with a tail risk from broader cyclical leisure/entertainment.

XLY (Consumer Discretionary Select Sector SPDR Fund) offers exposure to consumer discretionary broadly: ~25 % restaurants/leisure in its portfolio, rest spread across retail, autos, specialty goods. It has a very low expense ratio (~0.08 %) and large size (US$-tens of billions), offering scale and liquidity. However, its diluted restaurant exposure limits upside if restaurant‐specific themes outperform, while still leaving it vulnerable to broader consumer slowdowns.

From a strategic standpoint, several themes emerge:

• Operating leverage via value and simplicity: Companies executing menu simplification and value messaging (e.g. Brinker/Chili’s) and delivering traffic growth are rewarded. Performance variation among chains is increasingly linked to discipline in marketing, cost control, and customer experience.
• Off-premise and digital innovation: Delivery, takeout, drive-thru, catering etc. are becoming dominant growth vectors; Nielsen Statistics (per Nasdaq commentary) suggest off-premise may account for ~80 % of industry growth by 2025.
• Macro risk sensitivity: Inflation (food, energy, wages), labor shortages, and changing consumer spending behavior are material headwinds. As costs outpace revenues, margins get squeezed.

For an investor, choosing among these ETFs depends on risk tolerance and conviction in restaurant-specific upside. If highly confident in a sector turnaround and able to sustain volatility, EATZ offers highest leverage. For more moderate exposure, PEJ offers a compromise; for broader economic exposure with lower cost, XLY is preferred. Portfolios might combine elements to balance exposure.

Open Questions:

• Can consumer demand remain robust amid inflation and rising costs, especially in casual dining vs quick service? What thresholds tip consumers toward or against eating out vs cooking in?
• How durable are success stories like Chili’s/Brinker’s? Do they scale and compete well against digital expectancies and changing preferences (e.g., healthy, value, convenience)?
• What effect will supply-chain pressures (food costs, labor) have on smaller operators within EATZ, which may have less leverage?
• How will regulatory changes (minimum wages, food safety, operating hours) impact margins across the sector?