There’s an old parable about an irresistible force meeting an immovable object. It implies that, even in the toughest of stand-offs, something eventually has to give… The Fast Food industry has met an immovable economy. Which will give-in first?
McDonald’s is traditionally considered the Great Chief of Chiefs in the global Fast Food tribal confed-eracy. But even the widely celebrated pioneer of franchising is acknowledging it’s met what is so far proving to be an immovable object. That’s an economy in which even the mightiest cannot overcome the monumental challenges alone.
McD’s Chairman an CEO Chris Kempczinski recent told the most recent corporate earnings call:
“Our Q1 2025 hashtagearnings results are now live, and McDonald’s 70-year legacy of innovation, leadership, and proven agility give us confidence in our ability to navigate even the toughest of market conditions and gain market share,” told shareholders. “Consumers today are grappling with uncertainty, but they can always count on McDonald’s for both exciting new menu items and delicious favorites for exceptional value, from a brand they love.”
That’s a fancy way of saying, “Yah. Well… We’ve just experienced our second consecutive drop in revenues. And things look bleak.” In fact it was he first time since before the COVID crisis that McD’s revenues has taken such a ‘dip’. And during the pandemic, powers even greater than McD’s had TOLD consumers to ‘stay home, and shelter in place’.
A sector-wide trend
It’s not just MCD’s. Other Fast Food players including Chipotle, [holding company] Yum! Brands, Domino’s Pizza and Starbucks, have already reported flat or negative revenues for 2024, and the first Quarter of 2025.
And consumers, most of whom are from the lowest-income stratum of the Western economy, are staying home voluntarily. Not only that, but the malaise is expanding upward, into the middle class. That’s a first.
Why is this happening?
Try as they might, the fat Food players have hit a wall. They can’t seem to put on menu offerings that will both satisfy the hunger of customers and fit into their shrinking budgets. The median ‘standard’ Fast Food meal now costs around $15 at regular menu prices. And the players haven’t been able to knock prices down, below that.
There’s a leering, sneering contest on as we speak, in which the big brands have become entrenched, like the Allies and Germany in the First World War. They’re hunkering in their trenches, peering across an economic ‘no-man’s land’, fighting a ‘Value War’ in which no one is really making any headway.
‘It’s complicated…’
If had a buck for every time I’ve heard that excuse for failure on TV and in the movies – not just in the real world – I wouldn’t have to worry about money. But I’m a real person. And one who believes that, when confronted with some nasty, hard-edged reality, I have to get off my duff and look out for myself and mine. The other players in any situation have their own priorities and will undoubtedly be doing whatever is best for them and theirs. For the big Fast Food players, that the shareholders. Not consumers.
So I, as a little person with an already modest, and still shrinking, income naturally take a look around and realize, “I can’t afford to turn the lights and heat on, while at the same time indulging in Fast Food meals I could make at home for 1/2 to 1/3 the cost.” The lights and heat win every time.
But what are the economic pressures that are piling-on, to create the immovable object?
More than obvious
There are obvious gigantic ones, not the least of which include:
- Trump’s tariffs,
- Abiding high food costs,
- Still-increasing inflation (though the rate has plateaued for some goods and slowed for most others). And…
- The shrinking buying power of low and middle-income pay cheques.
But coming up fast on the inside, there are also:
- An increasing concern about the dangers of processed, and particularly ultra-processed foods. Which make up virtually 100 percent of the overall Fast Food menu. And now account for up to 70 percent of what the average American eats every day,
- A growing demand, especially from the younger gens, for ‘healthier’, fresher, ‘closer-to-their-natural state’ foods,
- A growing awareness of the non-sustainability of animal protein production in a fast-warming world. and…
- The need to plan for a Great Shift to plant-based foods – a challenge that Fast Food has thus far been unable to master.
My take
The consuming masses have begun to take their fates into their own hands. And their futures don’t include spending more than they can afford on Fast Food.
One social media comment I recently spotted put it simply: “Fast Food was originally supposed to be faster and cheaper than eating at home, and definitely cheaper than eating at a sit-down restaurant. It’s no longer any of those…”
The bottom line is, Consumers aren’t to blame for the situation. Neither is the Fast Food Industry. But consumers are demonstrating they can get away without Fast Food if they have to. The Fast Food sector mired in a mess that clearly illustrates it cannot survive without consumers. Guess whose court the ball is in?
~ Maggie J.