Restaurant executives shared with investors last week that diners are becoming more cautious about prices, leading to a decrease in dining out frequency. Some analysts noted that Starbucks experienced its weakest performance outside of pandemic or recession periods.
Consumers are scrutinizing their spending habits, with many opting to cut back on visits to fast-food restaurants. To entice budget-conscious customers, some chains are considering smaller price increases for the remainder of the year.
Executives from various fast-food chains painted a somber picture of the industry’s outlook. Wendy’s CFO Gunther Plosch highlighted that consumers, especially those with household incomes under $75,000, are feeling financial pressure, resulting in reduced visitation rates.
During the pandemic, many chains implemented significant price hikes to offset rising labor and food costs. However, this strategy is now backfiring as some diners perceive fast food as too expensive and no longer providing good value.
McDonald’s CFO Ian Borden acknowledged that consumers are becoming “price weary” and are dining out less frequently. Joshua Kobza, CEO of RBI, which owns brands like Burger King and Popeyes, echoed this sentiment, noting that diners are increasingly price-sensitive.
Several major chains, including McDonald’s, Burger King, Shake Shack, and Wendy’s, reported sluggish comparable sales growth in the US, attributed to a decrease in order volume.
Starbucks experienced a 3% decline in North America comparable sales, primarily due to a 7% drop in transactions, marking its weakest traffic performance outside of pandemic or recession periods.
Similarly, global comparable sales for KFC and Pizza Hut declined by 2% and 7%, respectively, compared to the same period in 2023. However, chains like Popeyes, Domino’s, and Wingstop saw growth in same-restaurant sales.
In response to pricing concerns, some chains are exercising caution. Wendy’s CFO indicated a plan for low-single-digit pricing increases for the year, emphasizing a conservative approach. McDonald’s pledged to be prudent and thoughtful about any future price hikes in 2024. Shake Shack announced no further price increases for the year after raising prices by mid-single digits.
