Managing the impact of inflation on fast food: McDonald’s, Wendy’s, Burger King
Consumers are still heading to fast food chains, despite inflation weighing on their wallets.
In May, the cost of out-of-home food jumped 7.4% from a year ago, but according to a new report from Placer.aiAmericans are eating in fast food as much as in 2021 and at some fast food giants, Americans are eating even more.
In the report, which was generated by anonymized location data from a panel of 30 million mobile devices, which Placer.ai then leverages with AI and machine learning to make estimates at the locations of overall visit, Shira Petrack, Placer.ai’s content marketing manager, found that the fast-food industry appears to be “maintaining relatively stable footfall patterns.”
Compared to May 2021, foot traffic in May 2022 is higher at McDonald’s, up 21.7%, and other fast food outlets including Wendy’s, up 5%, and Burger King, up 5%. 4.1%.
This spike in foot traffic comes as Americans slow down their spending. In May, US retail sales fell 0.3%, but on the fast food front, deals and bargains could attract Americans.
Consumers could swap high-end restaurants for cheaper options as they “reshuffle” their spending priorities to allocate “more of their budget to services,” says Lydia Boussour, chief US economist at Oxford Economics. and more expensive necessities” such as gasoline, food and shelter.
Boussour, however, pointed out that there was “pent-up demand for services like restaurants”.
“Some consumers are more likely to switch from more expensive dining experiences to cheaper fast food options in this high inflation environment,” she told Yahoo Finance.
Despite the option to grab cheaper meals on the go, consumers cannot ignore the historic increase in costs.
Peter Saleh of BTIG, which has covered the restaurant industry since 2008, says the industry is raising menu prices “much more than they have historically”.
On average, price increases have been around 2%, but in 2022 increases have been 6-8%, with “some cases even higher than that” due to commodity inflation and Workforce.
Wedbush’s Nick Setyan says Chipotle (CMG) in particular is a “unique animal” as digital sales soar for the channel. When everyone’s “feeling the crunch,” consumers are eager to save $5-10 on delivery costs, plus tip, so they order on the app to pick up in-store or at Chipotlane.
At Chipotle (CMG), foot traffic jumped 51.5% in the month of February compared to 2021. Placer.ai’s Petrack found that orders placed in-store and online “don’t need to be done at the expense of each other”.
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