Why American fast-food chains are struggling
Add Axios as your preferred source to
see more of our stories on Google.
Illustration: Sarah Grillo/Axios
Low-income consumers are increasingly steering clear of fast-food restaurants amid concerns about the broader economy.
Why it matters: Restaurant dining is often the first thing to go when the economy takes a turn for the worse.
State of play: Wendy's on Friday became the latest in a series of fast-food chains to report disappointing results in the U.S., where its same-store sales fell 3.6%.
- KFC reported earlier this week that its U.S. same-store sales declined 5% in its most recent quarter.
- Pizza Hut's U.S. same-store sales also slipped 5%.
- Popeyes posted a 0.9% decline, while Burger King eked out a 1.5% increase.
The big picture: McDonald's outshone the competition with a 2.5% sales increase, but the company warned that low-income folks are shying away from fast food.
- "Visits across the industry by low-income consumers once again declined by double digits versus the prior year period," CEO Christopher Kempczinski said on an earnings call Wednesday.
- "Reengaging the low-income consumer is critical as they typically visit our restaurants more frequently than middle- and high-income consumers."
The intrigue: When the fast-food economy takes a turn for the worse, it shows up quickly in breakfast sales, according to Wendy's interim CEO Kenneth Cook.
- "When consumer uncertainty increases and consumers choose to eat another meal at home, breakfast is often the first place that they do that with," he said Friday on an earnings call, acknowledging that "breakfast continues to perform worse than rest of day."
- McDonald's Kempczinski said the same thing, calling breakfast "the most economically sensitive" meal, and the easiest one for a stressed consumer to skip or eat at home.
- "We, as well as the rest of the industry, are seeing that the breakfast daypart is absolutely the weakest daypart in the day," Kempczinski said Wednesday.
Zoom out: Penny-pinching eaters are increasingly making food at home.
- "Consumers are cooking at home at the highest levels since early 2020," Campbell's CEO Mick Beekhuizen said in June.
The impact: For the fast food industry, competition for consumers is leading to "irrational tactics to promote value to drive traffic," according to TD Cowen analyst Andrew Charles.
- He didn't provide specifics, but McDonald's $5 Meal Deal was extended due to its popularity after it was introduced in 2024.
What we're watching: Menu innovation.
- McDonald's introduction of Snack Wraps and a marketing campaign with "Minecraft" help the company snack a two-quarter streak of same-store sales declines.
- At Wendy's, for example, the company is launching a new cold brew coffee.
