Recent earnings reports have confirmed economists’ January predictions that consumers would curb their spending at fast-food restaurants due to rising inflation affecting essential costs. This week, giants like McDonald’s, Starbucks, Pizza Hut, and KFC all revealed sales figures that fell short of expectations.
McDonald’s Chief Financial Officer Ian Borden emphasized the competitive pressure in the industry during the company’s earnings call. “Clearly everybody’s fighting for fewer consumers or consumers that are visiting less frequently, and we’ve got to make sure we’ve got that street-fighting mentality to win, [regardless] of the context around us,” Borden stated.
Despite efforts to attract customers, McDonald’s reported a modest 2.5% growth in same-store sales in the U.S. for the first quarter, from January through March, slightly below the projected 2.55% and significantly lower than the 12.6% growth seen in the same period last year.
Starbucks, Pizza Hut, and KFC also experienced declines in their same-store sales, with Starbucks seeing its first drop in nearly three years at 3%. Pizza Hut and KFC reported a 7% and 2% decline, respectively. These results reflect a broader trend influenced by inflation and consequent price increases, with McDonald’s raising its menu prices by 10% last year.
An analysis by Restaurant Business across all 50 states highlighted a 55% price jump in the average McDonald’s cheeseburger over the past three years. This price hike comes when eating at home has become relatively cheaper. In a February earnings call, McDonald’s CEO Chris Kempczinski noted that home dining costs had risen only modestly in comparison, citing a consumer price index report that indicated that food-at-home prices had increased by 1.2% over the past year, whereas dining out costs had risen by 4.2%.
These financial pressures are challenging for fast food operators as they navigate inflationary pressures and a fiercely competitive market fighting over a shrinking consumer base.
