McDonald’s and Starbucks aim to improve | Wilnesh News

The restaurant industry has had a tough year, and executives can’t wait for 2025 to arrive.

Kate Jaspon, chief financial officer of Inspire Brands, the parent company of Dunkin, said: “I don’t know about you, but I’m ready for ’24’ to be over, and I think ’25’ is going to be a great year.

Restaurant bankruptcy filings have surged more than 50% so far in 2024 compared with the same period last year. According to data from industry tracker Black Box Intelligence, traffic at restaurants open for at least a year has declined annually from 2024 through September. and many of the nation’s largest restaurant chains, McDonald’s arrive Starbucksinvestors were disappointed by at least one quarter of lower same-store sales.

But signs of recovery are already emerging, fueling tepid optimism about the future of the restaurant industry.

Sales improved from this summer’s lows. According to data from Revenue Management Solutions, customer traffic at fast food restaurants increased by 2.8% in October compared with the same period last year. The company’s data corroborates anecdotal evidence from Burger King owners and others International restaurant brandThe company said earlier this month that same-store sales rose in October.

Plus, interest rates are finally coming down. In early November, the Federal Reserve approved its second consecutive interest rate cut. For restaurants, lower interest rates mean new stores are cheaper to finance, fueling growth. Previously, higher rates hadn’t had much of an impact on development, as restaurants were still catching up on delays caused by the pandemic and enjoying the highs of a post-COVID sales boom.

in burger chain shake cabinTreasurer Katie Fogertey said higher interest rates over the past few years have not slowed down development. But she expects a “significant boost” in consumer confidence as interest rates fall.

“If credit becomes cheaper, people will feel like they can borrow more, although that won’t necessarily drive consumption of $5 burgers. It’s just the psychology behind it,” Fogarty told CNBC.

Shake Shack reports same-store sales have grown every quarter so far this year, even as consumers become more cautious.

Restaurant valuations are also improving, raising hopes that the IPO market will eventually thaw.

“We’re working with a lot of different people right now to get ready,” said Damon Chandik, managing director of Piper Sandler at RFDC. “The window is not fully open at the moment… I think given the traffic pressures that we’re seeing across the industry , the threshold is extremely high.”

He added that he expects to see some restaurant IPOs next year, hopefully in the first half of the year.

Not since Mediterranean chain Restaurants has a major restaurant company gone public Cava IPO in June last year. While Cava’s shares have risen more than 500% since listing, its success hasn’t encouraged any of the other big private catering companies to take the plunge. Instead, broader market conditions scared away other competitors.

Panera Bread secretly filed to go public again nearly a year ago, but the IPO has yet to materialize. Inspire Brands, owned by private equity firm Roark Capital, is another possible candidate for a massive IPO in the future. Inspire’s product portfolio includes Dunkin’, Buffalo Wild Wings, Jimmy John’s, Sonic, Arby’s and Baskin-Robbins.

Still, it’s not all optimism in the industry.

“I think we’ll still see headwinds next year both macro and within the industry,” Portillo’s Chief Financial Officer Michelle Hook told CNBC.

The fast-casual chain, known for its Italian beef sandwiches, reported same-store sales declines for the third consecutive quarter. Portillo’s doesn’t take advantage of some of the discounts offered by other companies in the restaurant industry, such as McDonald’s and Chili’s.

The value war is likely to continue into 2025, putting pressure on restaurant profits and intensifying competition among chains. McDonald’s, for example, plans to roll out a broader value menu in the first quarter after extending its $5 value meals from summer to winter. For some restaurants, the looming threat of bankruptcy has not gone away, especially for chains that rely on discounts to win back customers.

While a recession next year is unlikely, it may take consumers longer than expected to recover from years of high costs.