Fast-food chains suffering

[force majeure]

Are people finally copping on, these food places are not good value anymore?

I like the below quote.

https://www.cnbc.com/2024/05/01/starbucks-mcdonalds-yum-earnings-show-consumers-pulling-back.html


"McDonald’s said it’s adopting a “street-fighting mentality” to creating value to win over customers"

[kanga1622]

I do think some people are starting to realize that it is too dang expensive to take a family out for a meal these days and the food isn't that great at most of these places. Or perhaps some people aren't putting their kids in as many activities (to save on those fees) and by default they aren't on the road as much with a "need" to grab a meal on the go.

We weren't really big on eating out often before but I did enjoy ordering pizza a couple times a month just to get a break from cooking. Now that has been replaced by the occassional package of pizza rolls or other air fryer ready food that my son can cook so I get a break.

[tygertygertyger]

Hmmm. Loads of fast food places by me have redesigned their spaces to go all-in on drive-throughs. I've been wondering if the goal is to save on property taxes, since a few years back everyone was redesigning to have more upscale interiors (fake fires, etc).

[evanc]

irregardless...McDonald’s CFO Ian Borden said 

Things that make you go hmmm

[obstinate]

We never go to fast food except when travelling but reasonably good prices can still be had on their value menus. BK was running a promo where you got two whopper jrs for $5. Fed the whole family for $25 including tax. To be clear, I'm not advocating that anyone should go out of their way to go to fast food even for a deal like this, but the system can still be worked.

[Michael in ABQ]

Hmmm. Loads of fast food places by me have redesigned their spaces to go all-in on drive-throughs. I've been wondering if the goal is to save on property taxes, since a few years back everyone was redesigning to have more upscale interiors (fake fires, etc).

It's not the property taxes, it's the labor. No dining room means less labor taking orders in person and you can push people to order online or with an app. Labor is the largest expense of almost any restaurant - especially in a place like California where they just raised the minimum wage to $20/hour for restaurants.



We have a big family so even 5 years ago it would cost $50+ for us to just get a meal at Chick-Fil-A. Nowadays if we stop to get fast food it's usually a couple of orders of fries to split just to tide us over until we can get home and have a real meal. Sometimes though, we're out for longer than planned and break down and order a pizza or stop to get fast food.

Between dietary restrictions/allergies for my wife and I there is very little we can eat at restaurants so that naturally limits things for us. Now that our kids are older if they want to get a milkshake or some fries, we make them pay for it. All of the sudden that milkshake doesn't seem as appealing if they have to pay $5 for it.

[MaybeBabyMustache]

We buy "fast food" maybe 3x/year, on road trips or the like. I have a bunch of Subway gift cards from unknown events, and haven't spent them in years. Maybe I will treat the teens to Subway this week, as they each have a bunch of AP exams & they love Subway. We're not big sandwich eaters, so rarely have sandwich fixings at our house. Perhaps that's part of the Subway appeal.

If we're on a road trip (for us,most likely driving to Lake Tahoe for skiing), we typically gas up at a Costco, and buy the teens lunch at the food court. It's under $5 for both of them. Neither DH & I eat it, and we'll have had a late brunch before we leave.

I did just buy Chipotle while on a hiking trip, and my mom & I split a burrito bowl. Reasonably priced, I suppose, for the quality of the ingredients & the fact we could share. Additionally, we went to In & Out on the way to the airport, and bought lunch for two for $12. Pretty reasonable. The last time I was at In & Out was a year or so ago, when my parents were visiting.

Similar to Michael in ABQ, my teens have their own money (earned through summer jobs) that they use for meals out when we aren't there. They definitely purchase fast food, and make regular comments about how expensive it is. So, they are aware & it's all part of the process of them learning about priorities, budgeting, spending money, etc.

Anyway, we're not big diners out anyway, but typically if we're eating out, it's for a special occasion & thus definitely not fast food.

[Villanelle]

I'd love to attribute this to increased frugality, but it seems to me that it's just that people have found an even easier (and even more expensive) way to feed themselves.  Instead of driving through McDonald's on the way home from work, they put in an Ubereats order.  It's even less time and effort on their part, but probably costs 2x (or more) the price of that McDonalds order.  The base of the restaurant pricing is even more, and then they pay al the delivery fees and upcharges.  They might have spend $30 at McDonalds, and instead they spend $70 at Bob's Tacos and Curry House. 

I think some of this shift is probably that Fast Food costs almost as much as less-fast food (Panera, Chipotle, smaller independent places) so sure, people are going to get better food if it only costs slightly more.  But I also think that the reasons people went to fast food in the first place--speed and convenience--can now be achieved with delivery apps. 

[Morning Glory]

I'm surprised the article didn't blame millennials for killing another thing. But really, fuck them.  These chains have benefited from all manner of government subsidies while making everyone poorer and sicker and if they still can't keep afloat they have a bad business model and need to go under. People will be better off without them anyway.

[Just Joe]

Is there any way to see what the cost of labor is for these companies? I would not be surprised if the cost of labor was just a tiny part of the total equation.

When our kids were younger fast food had some appeal b/c of convenience. These days they have their own activities and money. DW and I have adapted. We just like to go home after work and eat something there. My midsection appreciate that going forward. More and more when we travel bringing something along like fruit or veggies or home brewed tea has appeal.

[Morning Glory]

Is there any way to see what the cost of labor is for these companies? I would not be surprised if the cost of labor was just a tiny part of the total equation.

When our kids were younger fast food had some appeal b/c of convenience. These days they have their own activities and money. DW and I have adapted. We just like to go home after work and eat something there. My midsection appreciate that going forward. More and more when we travel bringing something along like fruit or veggies or home brewed tea has appeal.

Looks like you could staff a lot of locations on just what the ceo brought in:

https://247wallst.com/business/2023/05/02/mcdonalds-ceo-makes-1200-times-workers/

"The pay for workers was $14,521, while Kempczinski made $17,770,514"

[Just Joe]

Then no real reason to raise costs when the CEO and C-suite could absorb some of the costs.

I remember when the ACA was being heavily debated in the media the CEO of Papa John's was complaining that to give employees benefits he'd have to raise prices a dime or more.

I never fact checked that statement but it really diminished my interest in that brand. I like a good pizza from time to time.

[Michael in ABQ]

Is there any way to see what the cost of labor is for these companies? I would not be surprised if the cost of labor was just a tiny part of the total equation.

When our kids were younger fast food had some appeal b/c of convenience. These days they have their own activities and money. DW and I have adapted. We just like to go home after work and eat something there. My midsection appreciate that going forward. More and more when we travel bringing something along like fruit or veggies or home brewed tea has appeal.

I appraised several fast-food restaurants and I recall labor being about 25% - 35% of revenue. Food was usually the next biggest line item.

I recall appraising a KFC with three employees on site total making about $800k/year in revenue while a typical Chick-Fil-A has well over 100 employees (with 15-25 working at any time) but generates on average $9 million in sales per location.

[Michael in ABQ]

Is there any way to see what the cost of labor is for these companies? I would not be surprised if the cost of labor was just a tiny part of the total equation.

When our kids were younger fast food had some appeal b/c of convenience. These days they have their own activities and money. DW and I have adapted. We just like to go home after work and eat something there. My midsection appreciate that going forward. More and more when we travel bringing something along like fruit or veggies or home brewed tea has appeal.

Looks like you could staff a lot of locations on just what the ceo brought in:

https://247wallst.com/business/2023/05/02/mcdonalds-ceo-makes-1200-times-workers/

"The pay for workers was $14,521, while Kempczinski made $17,770,514"

That's a BS comparison because there are very few (if any) full-time employees working 40 hours per week making minimum wage at a McDonalds.

My teenage son just submitted an application to McDonalds, and the starting pay is $13/hour in Albuquerque - not exactly a HCOL city. State minimum wage is $12.00/hour.

Then no real reason to raise costs when the CEO and C-suite could absorb some of the costs.

I remember when the ACA was being heavily debated in the media the CEO of Papa John's was complaining that to give employees benefits he'd have to raise prices a dime or more.

I never fact checked that statement but it really diminished my interest in that brand. I like a good pizza from time to time.

Approximately 13,500 McDonald's in the US. Split the CEO's pay between all of them and it's about $1,300 per unit (assuming an average 100 employees per restaurant). So, each employee could get about $10 per year if the CEO distributed all their pay evenly between them.

Of course, most McDonald's are operated by franchisees who set the pay for their individual restaurant - not the CEO. On average they're making a 100-200k a year in profit, but they also had to invest about one or two million dollars to open a restaurant.

[obstinate]

Then no real reason to raise costs when the CEO and C-suite could absorb some of the costs.

They should just take the costs out of the dividends paid to Just Joe's shares. :P If there is not enough to cover it, I'm sure he'd be willing to donate his equity.

[Just Joe]

Is there any way to see what the cost of labor is for these companies? I would not be surprised if the cost of labor was just a tiny part of the total equation.

When our kids were younger fast food had some appeal b/c of convenience. These days they have their own activities and money. DW and I have adapted. We just like to go home after work and eat something there. My midsection appreciate that going forward. More and more when we travel bringing something along like fruit or veggies or home brewed tea has appeal.

I appraised several fast-food restaurants and I recall labor being about 25% - 35% of revenue. Food was usually the next biggest line item.

I recall appraising a KFC with three employees on site total making about $800k/year in revenue while a typical Chick-Fil-A has well over 100 employees (with 15-25 working at any time) but generates on average $9 million in sales per location.

Thank you for that.

[Just Joe]

Then no real reason to raise costs when the CEO and C-suite could absorb some of the costs.

They should just take the costs out of the dividends paid to Just Joe's shares. :P If there is not enough to cover it, I'm sure he'd be willing to donate his equity.

Sure! Go for it. ;)

[ChpBstrd]

I think some of this shift is probably that Fast Food costs almost as much as less-fast food (Panera, Chipotle, smaller independent places) so sure, people are going to get better food if it only costs slightly more.  But I also think that the reasons people went to fast food in the first place--speed and convenience--can now be achieved with delivery apps.

Yes, I was about to say this exact thing.

Also, it seems like the price gap between fast food - the lowest tier of quality - and casual dining places is smaller than it used to be, in percentage terms. Why eat a garbage burger when you could pay two or three bucks more at Chilis or Panera? Why eat a garbage burger that will make you feel sick when local independent places will sell you a much more interesting meal for the same price?

Chick-fil-a to me tastes like microwaved chicken from the grocery store's frozen section, and an uninspired, greasy meal there costs the same as a whole tray of food from my local Mexican restaurant. I can view their menu on my phone, place my order, and it'll be ready for me to pick up by the time I arrive.

Then there's the convenience of apps, as mentioned. I just don't see the point of these drive thru places.

[GuitarStv]

Agreed that the spread between fast food and slightly less crap restaurant food has shrunk . . . And is likely eating away at customers.  But food delivery is probably doing just as much damage.  The point of fast food is speed, but if you can order online and get stuff delivered at a certain time . . . then all the quality shortcuts to make food "fast" don't really make sense anymore.

[Just Joe]

Then there's the convenience of apps, as mentioned. I just don't see the point of these drive thru places.

Drive-thru food only works when traveling by car IMHO. And not even really then since the greasiness can lead of stomach upset and who wants to deal with that when traveling?

[Samuel]

Could some of this downturn in fast food sales be related to the surge in people using GLP-1 drugs (Ozempic, etc)? I know it's still a relatively small number of people but I'd assume regular fast food customers would be over represented in that group.

[ChpBstrd]

Could some of this downturn in fast food sales be related to the surge in people using GLP-1 drugs (Ozempic, etc)? I know it's still a relatively small number of people but I'd assume (formerly) regular fast food customers would be over represented in that group.

Hard to say. Offset that with an increasing number of people on marijuana prescriptions.

[Chris Pascale]

I'm surprised the article didn't blame millennials for killing another thing. But really, fuck them.  These chains have benefited from all manner of government subsidies while making everyone poorer and sicker and if they still can't keep afloat they have a bad business model and need to go under. People will be better off without them anyway.

Now that we're all of age, more articles are honing in on the next gen that's half kids.

[Chris Pascale]

"McDonald’s said it’s adopting a “street-fighting mentality” to creating value to win over customers"

When he thinks of a street fight, he thinks appealing to the community. What an idiot. It's like those C-suite turds who say things like, 'when you run a public company, you wake up every day and it's like going to war.' No it's not.

[jim555]

Fast food apps have deals once in a while that are actually a good deal.  Once in a while you see something.  Yesterday McDonald's had free 6 pc. McNuggets.  Arby's had a great sandwich deal weekly for a month.

[namasteyall]

Fast food chains could presumably help us all:
e.g. start buying organic food cheaply since they are such huge buyers. Just start slowly....

[dividendman]

Fast food apps have deals once in a while that are actually a good deal.  Once in a while you see something.  Yesterday McDonald's had free 6 pc. McNuggets.  Arby's had a great sandwich deal weekly for a month.

Wendy's has a junior bacon cheeseburger for one cent all next week!

[Michael in ABQ]

$40 to feed five people at McDonald's yesterday. Some chicken nuggets, a couple small hamburgers, three orders of fries, and a few drinks/shakes. This was our once-a-year trip to McDonald's after backpacking/camping as it's pretty much guaranteed there will be a McDonald's in the nearest city after we hike out wherever we're camping that year. The kids look forward to it on the hike out. I just grabbed a few fries and chicken nuggets out of it. That place was packed with everyone coming back from camping over Memorial Day weekend.

[tj]

Fast food apps have deals once in a while that are actually a good deal.  Once in a while you see something.  Yesterday McDonald's had free 6 pc. McNuggets.  Arby's had a great sandwich deal weekly for a month.

Wendy's has a junior bacon cheeseburger for one cent all next week!

But only on the stupid app? It's annoying that they make you install the app to get the deals.

[GilesMM]

$40 to feed five people at McDonald's yesterday. Some chicken nuggets, a couple small hamburgers, three orders of fries, and a few drinks/shakes. This was our once-a-year trip to McDonald's after backpacking/camping as it's pretty much guaranteed there will be a McDonald's in the nearest city after we hike out wherever we're camping that year. The kids look forward to it on the hike out. I just grabbed a few fries and chicken nuggets out of it. That place was packed with everyone coming back from camping over Memorial Day weekend.

We just discovered local burger truck that makes a huge fresh juicy hamburger on a toasted bun with lovely onion, tomato and lettuce for a whopping $3.59.  To paraphrase the Starbucks rant guy, "Shove it up your ass, McDonald's!"

[Michael in ABQ]

$40 to feed five people at McDonald's yesterday. Some chicken nuggets, a couple small hamburgers, three orders of fries, and a few drinks/shakes. This was our once-a-year trip to McDonald's after backpacking/camping as it's pretty much guaranteed there will be a McDonald's in the nearest city after we hike out wherever we're camping that year. The kids look forward to it on the hike out. I just grabbed a few fries and chicken nuggets out of it. That place was packed with everyone coming back from camping over Memorial Day weekend.

We just discovered local burger truck that makes a huge fresh juicy hamburger on a toasted bun with lovely onion, tomato and lettuce for a whopping $3.59.  To paraphrase the Starbucks rant guy, "Shove it up your ass, McDonald's!"

Hopefully they survive on what are probably very thin margins. They may not realize yet that they're not profitable at prices that low.

[Dicey]

Just think of the health benefits to the public if they all disappeared. Mostly, but not entirely, kidding.

[Rusted Rose]

We just discovered local burger truck that makes a huge fresh juicy hamburger on a toasted bun with lovely onion, tomato and lettuce for a whopping $3.59.

Which metro might this be in?