Fast food chains, from IHOP to Chipotle, are struggling as many Americans choose to eat at home due to high prices and concerns over the job market.
Data from Circana shows that Americans dined out 1 billion times from January to March.
This drop in restaurant visits has raised alarms among executives at Dine Brands (owners of IHOP and Applebee’s), along with cast members from Wendy’s, Denny’s, and Chipotle.
Denny’s CEO Kelly Barredo pointed to a “very choppy consumer environment” last week, while CFO Robert Verostec cited “macroeconomic changes” impacting the company’s shaky sales in July.
On the other hand, McDonald’s has seen a rebound in sales, targeting budget-conscious diners with appealing deals. Nevertheless, CEO Chris Kempczinski noted that visits from low-income customers have decreased significantly from April to June.
“People are skipping meals or opting for less expensive items on our menu, or they’re just cooking at home,” he remarked.
Kempczinski also mentioned that the varied consumer behaviors make them cautious about the overall short-term outlook for U.S. consumers.
To adapt, McDonald’s plans to enhance its value offerings, keeping its popular $5 meal while aiming to reconnect with lower-income patrons who generally visit more frequently than their wealthier counterparts.
Competitors quickly followed suit, launching their own appealing meal options, including Taco Bell’s attractive meal boxes and $5 combos from Burger King and Wendy’s.
Yet, market research from Black Box Intelligence indicates that visits to U.S. restaurants have dipped by 1% compared to last year.
Fast food outlets were particularly hit hard, facing a 2.3% drop in traffic in the second quarter.
Even frequent diners are now ordering fewer drinks and appetizers, gravitating toward cheaper menu items, noted John Peyton, CEO of Dine Brands.
Michael Skipworth, CEO of Wingstop, added that chicken wing places are also seeing challenges, with surveys revealing concerns about price hikes and future job prospects among low-income customers.
While food inflation is slowing and prices have remained stable since last month, according to the Bureau of Labor Statistics, the impression still exists that dining out is becoming more costly.
The Ministry of Agriculture suggests that the expenses related to eating out may soon surpass those of cooking at home.
Sally Lions Wyatt, a food service advisor at Circana, mentioned that various factors are being leveraged to encourage consumers to spend money on dining out this year.
Executives hope to see a resurgence in customers at restaurants and drive-thrus once tariff worries are alleviated.
“Much of what we’re facing now relates to broader macroeconomic factors; low-income consumers are seeking value,” Chipotle’s CEO Scott Boatwright reflected last month. “I think we’ll see improvements as overall sentiment improves.”
