Navigating inflation impact on fast food: McDonald's, Wendy’s, Burger King
Consumers are still heading to fast food chains — despite inflation taking a toll on their wallets.
In the month of May, the cost of food away from home jumped 7.4% compared to a year ago, but according to a new report from Placer.ai, Americans are eating out at fast food restaurants the same amount as 2021 and at some fast food giants, Americans are dining out even more.
In the report, which was generated by anonymous location data from a panel of 30 million mobile devices, which Placer.ai then leverages with AI and machine learning to make estimates about overall visit locations, Shira Petrack, Placer.ai marketing content manager, found that the quick-service restaurant sector seems to be "maintaining relatively steady visitation patterns."
Compared to May 2021, foot traffic in May 2022 is higher at McDonald's, up 21.7% and at other fast food locations including Wendy's, up 5% and Burger King, up 4.1%.
This spike in foot traffic comes as Americans slow down their spending. In the month of May, U.S. retail sales fell 0.3% but on the fast food front, deals and bargain offerings may be luring Americans in.
According to Lydia Boussour, Oxford Economics Lead US Economist, consumers might be trading in up-scale dining for less expensive options as they "reshuffle" their spending priorities to allocate "more of their budget toward services and pricier necessities" like gas, food and shelter.
Boussour emphasized however, there is "pent-up demand for services like dining out."
"Some consumers are more likely to trade down from pricier dining experiences to less expensive fast food options in this high inflation environment," she told Yahoo Finance.
Despite the option grab cheaper meals on the go, consumers cannot ignore the historic cost increase.
Peter Saleh of BTIG, who has been covering the restaurant sector since 2008, says the sector is raising prices on menus "substantially more than they have historically."
On average, price increases have been around 2% but in 2022 increases have been 6-8% with "some instances even higher than that" due to the commodities and labor inflation.
Nick Setyan of Wedbush says Chipotle (CMG) in particular is a "unique animal" as digital sales soar for the chain. When everyone is "feeling the crunch" consumers are eager to save $5 to $10 on delivery fees, plus tip, and so they're ordering on the app to pick up in store or at the Chipotlane.
At Chipotle (CMG) foot traffic jumped as high as 51.5 percent in the month of February compared to 2021. Placer.ai's Petrack found that orders made at the store and online "do not need to come at the expense of each other."
Brooke DiPalma is a producer and reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at email@example.com.
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