Fast-Food Chains Adapt as Low-Income Diners Pare Orders
In the face of escalating prices, US fast-food companies are witnessing a notable shift in consumer behavior. Chains such as McDonald’s and Wendy’s have expressed concern over the potential loss of business from low-income customers, who are increasingly feeling the pinch.
A survey by Revenue Management Solutions revealed that approximately one-fourth of consumers earning under $50,000 annually are cutting down on fast food consumption. Furthermore, about half reported fewer visits to fast-casual and full-service restaurants. The surge in food prices, which saw a 20% increase from January 2021 to January 2024, is a significant factor driving this trend.
The impact of rising costs is evident in the experiences of individuals like Lauren Oxford, a musician from Tennessee. Once a regular at McDonald’s for an affordable meal deal, Oxford has had to modify her order and frequency of visits due to a 10% price hike by the franchisees.
According to the Federal Reserve’s Beige Book, low-income consumers across seven out of twelve districts are altering their spending habits, seeking bargains, and facing difficulties in accessing credit. With a substantial portion of Black American households and 21% of white American households earning less than $35,000 in 2022, the strain is widespread.
Despite the decline in customer traffic, sales for fast-food chains have remained stable due to higher prices. Industry experts like Mike Lukianoff, CEO of SignalFlare.ai, note that companies are prioritizing profit over traffic compared to a decade ago.
Historically, economic downturns have led to aggressive value deals in the fast-food industry. However, current strategies involve more targeted discounts aimed at specific demographics or meal times, often through digital channels like mobile apps.
McDonald’s CFO Ian Borden emphasized the importance of affordability and evolving value offerings to retain low-income consumers. Similarly, Wendy’s has introduced app-exclusive deals to maintain market share among these customers.
Loyalty apps have become a key strategy for increasing retention and spend per visit. McDonald’s and Domino’s are leveraging these platforms to offer discounts and rewards that make their brands more accessible to budget-conscious diners.
Despite the challenges, not all chains are experiencing a downturn with low-income customers. Taco Bell, for example, has seen locations in low-income areas perform well. Additionally, loyal customers like Andreas Garay remain devoted to their fast-food habits, undeterred by rising prices.