Fast-food and fast-casual dining chains are feeling the pinch as consumer spending shows signs of slowing amid mounting inflationary pressures. Joining Market Domination to discuss the importance of value in the restaurant industry are Bernstein U.S. Restaurant Senior Analyst Danilo Gargiulo and UBS Executive Director of Equity Research Dennis Geiger.
Gargiulo acknowledged that attracting customers has become “increasingly difficult” because “traffic is slowing down across the industry.” He stressed that chains need to be “conscious” that value is a core element of their offering. However, for a giant company like McDonald's (MCD) that operates on a franchise model, the problem arises of aligning the profitability and profits of individual franchisees.
Geiger echoed similar sentiments, citing an “industry slowdown” in the quick-service restaurant and fast-food sectors. He attributes this trend to a variety of factors, including rising prices, a broader inflationary environment, and even tighter consumer budgets. Whatever the root cause, Geiger argues that there is “softening” in consumer demand, especially among lower-income consumers.
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Editor's note: This article was written by Angel Smith.