Restaurant chains feel the pinch as US consumers tighten their belts

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US consumers are eating at home to save money as they worry about a slowing economy and stubbornly high prices, leading restaurant chains to warn of declining sales.

IHOP and Applebee’s owner Dine Brands, Sweetgreen, Wendy’s and Denny’s all warned investors this week that consumers’ hesitancy to spend is hurting sales. Chipotle Mexican Grill made a similar warning last month.

Americans ate 1bn fewer meals at restaurants between January and March than the comparable quarter a year ago, according to data from market research firm Circana. That decline came after the share of meals eaten at home versus at restaurants has remained more or less steady since 2023.

McDonald’s chief executive Chris Kempczinski said that while sales at the burger chain returned to growth last quarter, visits from low-income customers in particular fell by “double-digits” between April and June as their real incomes declined.

“The result of that is you’re seeing people either skip occasions, so they’re skipping . . . breakfast or they’re trading down either within our menu or they’re trading down to eating at home,” Kempczinski said.

Fears of a slowing labour market and the economic impact of US President Donald Trump’s tariff scheme have discouraged spending, leading to what Denny’s chief executive Kelli Valade called “a very choppy consumer environment”.

“Macroeconomic changes” made the diner chain’s sales “pretty volatile” in July, added Denny’s chief financial officer Robert Verostek.

Consumers’ growing efforts to seek out savings by cooking more of their own food has sparked a wave of value meals from Taco Bell’s “luxe cravings boxes” to McDonald’s $5 meal deal in an effort to draw in diners, with mixed success.

Visits to US restaurants have fallen 1 per cent this year compared with 2024, according to market-research firm Black Box Intelligence. Fast-food restaurants have been hit the worst, with their traffic sliding 2.3 per cent in the second quarter compared with the previous year.

“Right now we have highly leveraged consumers,” said Sally Lyons Wyatt, a Circana adviser who focuses on the food service industry.

“It’s going to take a lot of levers being pulled in order to get consumers more comfortable to spend more money out of home. And it’s not going to be this year.”

When Americans did eat out, they were cutting back on beverages and appetisers or “trading down” to more inexpensive menu items in an attempt to lower their bill, said Dine Brands chief executive John Peyton.

“Through our regular consumer research, we hear concerns about elevated prices, future job prospects, and general anxiety about the future,” said Wingstop chief executive Michael Skipworth, adding that the growing chicken wing chain had seen some “softness” among low-income diners.

While overall food inflation has slowed, the cost of eating out is outpacing that of cooking at home, with the consumer price index for food at home up 2.4 per cent and food away from home climbing by 3.8 per cent in the 12 months to June. The US Department of Agriculture forecasts that the costs of eating out will keep rising more quickly than home meals. Last year consumers spent $1.1tn on food at home and $1.5tn for food away from home, including taxes and tips.

“The last holdout for where consumers were still spending was food and beverage,” Wyatt said. “But we’re seeing slowing in food and beverage.”

In the meantime, companies inside and out of the food service sector are trying to take advantage of the cooking boom.

Reynolds Consumer Products, the maker of Reynolds Wrap aluminium foil and Hefty food storage bags, was expanding its distribution of items for home meals, chief executive Scott Huckins told analysts last week.

“The need for convenient ways to cook and enjoy food at home is also growing, driven by demographic changes and food away-from homes continued outpacing of food at-home costs,” he told analysts.

Still, restaurant operators remained hopeful that traffic would rebound before the end of the year.

“I think much of what we’re experiencing right now is due to macro and the consumer — the low-income consumer is looking for value as a price point at present . . . ,” Chipotle Mexican Grill chief executive Scott Boatwright told analysts last month after lowering the chain’s sales growth target for the second time this year.

“I think as sentiment improves, the business will improve.”

Additional reporting by Gregory Meyer in New York

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