Fast-food restaurant sales slump as more people eat at home

FOX Business ^ | May 2, 2024 | Aislinn Murphy

[Red Badger]

Economy, other factors have put pressure on consumers

People seem to be buying less food from quick-service restaurants (QSR).

That appears to be the case after companies such as Yum! Brands, Starbucks and McDonald’s offered their latest quarterly updates on their businesses.

In the first quarter, the corporate parent of KFC, Taco Bell and Pizza Hut said its overall same-store sales narrowed by 3%, which was "expected," said Yum! Brands CEO David Gibbs in the company’s press release Wednesday.

CFO Chris Turner told analysts and investors who tuned into the earnings call that Yum! Brands had expected the first quarter to "be our most challenged" in terms of same-store sales "due to prior year lapse, a return to a more normal inflationary environment and discrete consumer demand pressures, including markets impacted by the Middle East conflict."

Of the three major brands owned by Yum! Brands, Pizza Hut and KFC both experienced decreases in same-store sales in the first quarter, at 7% for the pizza chain and 2% for the fried chicken chain. But the same metric at Taco Bell went up 1%, according to the company.

"As far as the international consumer goes, it’s probably more of an emphasis on value than there has been in past quarters," Gibbs said about KFC. "We are seeing the same thing in the U.S."

In the earnings release, he also said Yum! Brands was "encouraged by strong 2-year same-store sales growth and positive momentum exiting the quarter" for its chains.

There was a decrease of 4% in Starbucks’ global comparable store sales for its second quarter. That, the company said Tuesday, was "driven by a 6% decline in comparable transactions, partially offset by a 2% increase in average ticket."

"Headwinds discussed last quarter have continued in a number of key markets; we continue to feel the impact of a more cautious consumer, particularly with our more occasional customer, and a deteriorating economic outlook has weighed on customer traffic and impact felt broadly across the industry," CEO Laxman Narasimhan said. "In the U.S., severe weather impacted both our U.S. and total company comp by nearly 3% during the quarter. The remainder of our challenges were attributable to fewer visits from our more occasional customers."

McDonald’s, known for menu items like the Quarter Pounder and Big Mac, said its first-quarter comparable sales went up 1.9%. In comparison, it showed increases of 3.4% in the prior quarter and 12.6% in 2023’s first quarter.

Chris Kempczinski, the CEO of McDonald’s, said it was "clear that broad-based consumer pressures persist around the world."

"Consumers continue to be even more discriminating with every dollar that they spend as they [face] elevated prices in their day-to-day spending, which is putting pressure on the QSR industry," he said. "It is worth noting the Q1 industry traffic was flat to declining in the U.S., Australia, Canada, Germany, Japan and the U.K. And across almost all major markets, industry traffic is slowing."

Many quick-service restaurants, including McDonald’s, Yum! Brands and Starbucks, have been emphasizing value and deals amid the current economy that has pushed some consumers to prioritize eating at home more to save money.

And some others in the industry, meanwhile, experienced comparable sales growth in their most recently reported quarters. Chipotle and Restaurant Brands International were among them.

Yum! Brands, Starbucks and McDonald’s each have a major global presence, with each having tens of thousands of locations around the world.

[faithhopecharity]

I see. yes. grandparents are, after all, grandparents
(at least they will be until some of today’s “parents” get grandkids)

McD has been known for many years to use a great many chemicals in its products. I used to be able to eat McD’s okay but no longer. Those big smokestacks in New Jersey, or maybe Communist China?, must have some new “additives” for McD’s? The last McD I tried to eat caused almost instant heaving regurgitation and I spewed it all over the interior of the car before I could get the window open or pull over to a rest/barf stop. I believe there must definitely something going on with the chemical alchemy.

At any event, I do realize that some folks like McD. My point wasn’t that it makes me barf. Simply, that the prices have got so high that families and many individuals cannot afford to patronize the place very much anymore. You see this also with the removal of the McD Playlands (they had rather cute play areas for children), the abandonment of the $1 menu items (whereby many a poor person could get a bite to eat), and the abandonment also of toys for kids. McD thinks it can make more profit by just moving its prices up and maybe we will see a couple “premium” burgers for, say, $12 or $15? I think McD needs new management. McD dominated the budget and family fast food market. It has thrown that away. For what? If I want to get a good burger, I will pay the higher price, yes, and go to Five Guys. Even the more directly=competitive Burger King puts out, imho, a far better product for about the same price as McD (and I don’t barf from BK).
I can’t figure out McD’s new business strategy. Wish I could, it would be interesting to be sure. I hope it is not like Sears Roebuck and JC Penney’s biz strategies, to almost abandon their most successful product lines and to try moving their price points up on cheap stuff, instead. You saw how the customer base just walked right out. Even from these venerable stores, both of which had good reputations for customer satisfaction and with their main product lines.

[steve86]

One of my takeaways about McD is that your franchise matters, as does the demographics of the employee base in the area.

I am fortunate here on both counts. And knowing several current and ex store managers I get inside stories on a lot of things.

Our stores are clean, team members are friendly and helpful, and the franchise ownership often goes to bat for customers against various corporate
- sponsored changes (such as limiting breakfast hours).

It is tedious to read comments on fast food threads here — “McD is crap, dining room is a trash bin, I get sick every time I go there...”. I say... Look at yourself, look at where you live, look at the guy that owns your franchise...

[steve86]

Also, revenue is still going up (slightly) although prices have stabilized and earnings are strong, so you can’t say the customer base departed en masse. But yes, it sure seems that families did, although some of this may just be less use of the dining rooms now — drive-thru and delivery still popular.

[faithhopecharity]

okay well....thanks. yes, we drive by the place on my way to food that doesn’t make me ill

we haven’t seen a family anywhere near McD’s since they changed their biz plan and pretty much abandoned the family market

people sense pretty fast when they’re unwelcome. and especially individuals or families that are on limited budgets (McD’s former core market segment, and one they served really rather well)

[Hillarys Gate Cult]

Check Culver’s website. I only heard about them here a year ago. I did a search and found out that we have one 11 miles away from me. Now there’s 3 including one near the newly opened Freddy’s;

https://www.culvers.com/locator/view-all-locations

[coalminersson]

april 1 Min wage for food workers in Cal $20. Near future will go to $25. Unless you gave money to newsome and are his friend like the owner of Pinera Bread which got an exemption to stay at 16. Cal is so F’d up we should stimulate and earthquae and send it out to sea.

[simpson96]

Good!

[dennisw]

Make much better at home too. Such as a hamburger.
Or I buy the cheapskate recession special, frozen pizza at Aldi. It is thin crust too. $3.40 or so. Then I mod it with what I want. More onion n peppers and anchovies if I have them. You can go to town with pepperoni if you like. Though Aldi has the same as above w pepperoni.

[Red Badger]

We buy Aldi’s pizza too and stoke it up.

Sam’s has a really good take and bake pizza as well..................

[dennisw]

If you are not modding your pizzas and computers, you are a loser with a capital L.
You want to make a superior version of ice cream at home?
Start with Aldis own home brand of whole milk Greek yogurt. Not any skim milk anything! More later if you want.

I have to go outside to mod my lawn irrigation