Breakfast sales at Wendy's and McDonald's are dwindling due to consumers tightening their financial belts.
In a series of reports published by our organization, Intelligence, the impact of tariffs on consumer product prices and availability, and the shifting sands of consumer spending amid rising prices and new tariffs have been highlighted. The reports paint a picture of a challenging economic landscape, particularly for travel and luxury spending, but also for some segments of the food industry, such as breakfast at fast-food chains like Wendy's and McDonald's.
According to Ken Cook, interim CEO of Wendy's, increased consumer uncertainty leads to a decrease in breakfast consumption. This sentiment is echoed by Chris Kempczinski, CEO of McDonald's, who identified breakfast as the weakest performing time of day. The reports found that income makes a difference in consumer sentiment, with only 13% of paycheck-to-paycheck consumers with issues paying their monthly bills saying they would continue buying at their current quantity and frequency amid price increases.
The struggle faced by these fast-food chains in boosting breakfast sales is multifaceted. Consumers are increasingly cutting back on spending due to economic uncertainty and financial pressure, leading many to skip breakfast out or eat at home instead. Despite offering discounts and value deals, these efforts have not been enough to attract low-income customers who remain financially strained and prioritize saving money by reducing meals eaten outside the home.
Wendy’s and McDonald’s executives acknowledge that breakfast sales are the weakest segment, with customers responding less to promotions and discount offers under current economic conditions. Wendy’s specifically noted that some discounts on breakfast items, like $1 drinks and $3 burgers, failed to produce the expected sales lift, indicating limited consumer spending willingness even with incentives. The competitive environment and consumer behavior shifts also contribute to the difficulties faced in boosting breakfast sales.
On a more positive note, the reports also indicate that U.S. households are proving to be resilient in terms of consumer spending. While back-to-school spending is a standout among retail categories, nearly one-third of respondents delayed or cancelled discretionary buys in June. However, 31% of financially secure consumers said they would continue buying at their current quantity and frequency amid price increases.
In conclusion, ongoing economic uncertainty and the financial pressure on low-income consumers are driving cutbacks in dining out, especially at breakfast, making discounts insufficient to reverse declining sales for Wendy’s and McDonald’s breakfast business. As the economic landscape continues to evolve, these fast-food chains will need to adapt and innovate to attract and retain customers in this challenging environment.
[1] Report: "New Reality Check: The Paycheck-to-Paycheck Report: Navigating the Shifting Sands of Consumer Spending Amid Rising Prices and New Tariffs" [2] Report: "Stock Out. The Impact of Tariffs on Consumer Product Prices and Availability" [3] Statement by Ken Cook, interim CEO of Wendy's [4] Statement by Chris Kempczinski, CEO of McDonald's [5] Report on Wendy's expected customer financial pressure for the remainder of the year, as reported in May.
- As the reports suggest, the current economic landscape, characterized by financial pressure and consumer uncertainty, is causing a shift in personal-finance habits, leading people to curb dining out, specifically at fast-food chains like Wendy's and McDonald's.
- The study "New Reality Check: The Paycheck-to-Paycheck Report: Navigating the Shifting Sands of Consumer Spending Amid Rising Prices and New Tariffs" highlights that income has an impact on consumer sentiment, with only 13% of low-income consumers continuing to buy at their current quantity and frequency amid price increases.
- In the wake of economic challenges, the mobile banking and personal-finance industry could witness an uptick as consumers, especially those most affected by tariffs and rising prices, seek ways to monitor and manage their finances more closely.
