URGENT UPDATE: Fast-food giants, including IHOP and Chipotle, are raising alarms as a staggering 1 billion fewer meals were consumed at restaurants between January and March 2023 compared to the previous year. This troubling trend has been fueled by consumer fears over high prices and a wavering job market, prompting many Americans to opt for home-cooked meals instead.
Latest data from market research firm Circana reveals a dramatic decline in restaurant patronage, triggering concern among executives at major chains like Denny’s, Wendy’s, and Applebee’s parent company Dine Brands. These companies are grappling with an increasingly cautious US consumer, with Denny’s CEO Kelli Valade describing the current consumer landscape as “very choppy.”
In stark contrast, McDonald’s has managed to rebound its US sales by focusing on value offerings. CEO Chris Kempczinski reported that visits from low-income customers plummeted by “double-digits” from April to June. He stated, “The result of that is you’re seeing people either skip occasions or trading down to eating at home.”
As the fast-food industry struggles, other chains are quick to adapt. Competitors like Taco Bell and Wendy’s have launched their own value meals in a bid to attract budget-conscious diners. Despite these efforts, overall visits to US restaurants have fallen by 1% this year, with fast-food establishments suffering the worst losses—traffic declined by 2.3% in the second quarter alone.
Compounding these challenges, Wingstop CEO Michael Skipworth noted a “softness” in spending among low-income diners, attributing it to “concerns about elevated prices, future job prospects, and general anxiety about the future.”
While food inflation has decelerated, with prices flat in July according to the Bureau of Labor Statistics, dining out remains more expensive than eating at home. The cost of eating out rose by 0.3% in July, whereas the food-at-home index saw a decline of 0.1%. Experts from the Department of Agriculture predict that this trend will continue, making it increasingly difficult for restaurants to regain lost customers.
Sally Lyons Wyatt, a Circana adviser, warned that significant changes in consumer sentiment are necessary before diners feel comfortable spending money on eating out again. “It’s going to take a lot of levers being pulled in order to get consumers more comfortable,” she stated.
Despite these challenges, executives remain hopeful. Chipotle CEO Scott Boatwright suggested that easing concerns over tariffs could rejuvenate customer traffic. “As sentiment improves, the business will improve,” he remarked.
As the fast-food sector navigates these turbulent waters, industry leaders are on high alert, actively seeking strategies to entice wary diners back into restaurants. With consumer anxiety at an all-time high, the future of dining out hangs in the balance. Stay tuned for further updates as this situation develops.
