On September 14, 2023, a food delivery person carried a to-go bag outside a Sweetgreen restaurant in Manhattan, New York City.
Gina Moon | The Washington Post | Getty Images
Helpful for high-income consumers Chipotle Mexican BBQ, wing stop and sweet green Sales were strong in the quarter, although slowing consumption hurt other restaurants, the report said.
Overall, restaurant sales are down and foot traffic is down as customers spend less. McDonald’s, Starbucks and KFC boss Yum Brands Wait for restaurant companies to report a poor start to 2024.
McDonald’s CEO Chris Kempczinski said diners are looking for deals and value for money; the chain is working to introduce $5 value meals, CNBC reported on Friday. and Applebee’s owner CEO John Peyton Catering brandindicating that the largest sales declines were among customers with annual incomes of less than $50,000.
Fast casual chains appear to be the exception to this trend. According to statistics, from November to February, the traffic volume of this industry grew faster than other catering industries. VisitorXM data.
In general, customers of fast-casual chain chains tend to have higher incomes than those in the fast-food industry, making the segment somewhat insulated from shrinking spending by lower-income consumers. Higher-income consumers are not feeling the same pressures as lower-income consumers.
Wingstop’s same-store sales surged 21% this quarter. CEO Michael Skipworth told CNBC that Wingstop’s customer base used to be primarily low-income customers, but now about three-quarters are higher-income diners. He also attributes the company’s success to growing brand awareness and its chicken sandwich, which is often the entry point for new customers.
Likewise, most of Sweetgreen’s stores are in high-income neighborhoods, CEO Jonathan Neman said last year. On Thursday, the salad chain reported first-quarter same-store sales growth of 5% and raised its full-year same-store sales growth forecast. Footfall was flat, but executives said bad weather and the impact of New Year’s Day and Easter had impacted its business.
value is important
As the cost of Big Macs and Whoppers rises, consumers’ perception of their value has also boosted Chipotle and other chains.
TD Cowen analyst Andrew Charles said fast-food chains increased prices more than fast-casual chains last year. While a bowl or salad at a fast-food restaurant is still more expensive than a burger or chicken tenders, the price gap between the two segments has narrowed.
“You can see that fast casual is an excellent value for consumers given the quality of the product they’re getting,” Charles said.
Many fast-casual chains, including Chipotle and Sweetgreen, have also been working to increase their “throughput,” an industry term that refers to how many bowls or salads their employees can make. Charles said the focus on efficiency means restaurants are serving faster and faster services, resulting in more transactions.
Investors are already betting that fast-casual chains will become outliers in consumer restaurant spending. Shares of Chipotle, Shake Shack and Wingstop are all up at least 35% in 2024. By comparison, the S&P 500 is up about 9% so far this year.
But there are exceptions to this segment trend. For example, Portillo’sThe company known for its Italian beef sandwiches and Chicago-style hot dogs said same-store sales fell 1.2% in the first quarter. The chain blamed “severe weather in the Midwest” for the weak results, especially early in the season.
Similarly, shake cabin The company said its quarterly ridership would have been flat if not for severe weather in January and February. The burger chain reported same-store sales growth of 1.6%, but noted that the metric has continued to improve each month. Same-store sales in April increased 4.9% compared with the same period last year.
Mediterranean fast food chain vein First-quarter results are not expected until May 28.
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