McDonald’s and other chains are dealing with stubborn sales challenges. | Photo courtesy of McDonald’s.
This is from the weekly restaurant finance newsletter The Bottom Line. To get this in your inbox every Monday morning, click here.
The restaurant business is not easy in the best of times. We cannot fathom how difficult it is now. And complicated.
For our evidence, we present McDonald’s and Starbucks, a pair of chains dealing with stubborn traffic and sales challenges.
We wrote Friday about McDonald’s traffic over the summer, which has slowed since July, despite the introduction of the Snack Wrap and lower prices on its Extra Value Meals. Starbucks, meanwhile, has had a shockingly stubborn sales challenge for nearly two years now, despite throwing just about everything imaginable at the problem over that period.
We are not quite sure what to make of all of it, really. Broadly speaking, consumers are cutting back on more regular visits. So rather than visiting restaurants three times a week maybe they visit twice. And when they go, they go for something that gets them excited.
That helps fuel sales at exciting chains like 7 Brew or Dave’s Hot Chicken. McDonald’s can get people in for the Snack Wrap and Starbucks can thrive when it starts selling the Pumpkin Spice Latte but has traffic challenges afterward.
But it remains perhaps one of the most complex environments we’ve ever seen. And given the federal government shutdown, falling consumer confidence and a weak labor market, we don’t expect it will get better anytime soon.
This week’s financial news
Wendy’s is looking to former Taco Bell CEO Greg Creed for help with its marketing. Probably not a bad idea to get the guy who helped create the Taco Bell playbook to help with your branding issues. But it’s also interesting that Wendy’s isn’t waiting to get a new CEO to do this.
Round Table Pizza is looking into the use of its ad funds after parent Fat Brands missed a payment to a marketing firm, triggering the loss of advertising for several months. That is not a good sign.
Domino’s did a brand refresh. So did Long John Silver’s. Good thing neither of them has people out there willing to pay for a bot campaign to complain about those changes.
I went to Chi-Chi’s and wrote about the experience.
Guillermo Perales bought another chain out of bankruptcy.
I’m old enough to remember when restaurant chains just didn’t file Chapter 7 bankruptcies. Now we’re getting them all the time.
Et tu, fast-casual chains?
Number of the week
This is Placer.ai data showing McDonald’s traffic compared with a year ago. The company had some tough comparisons during that time, but it still shows a slowdown in customer counts over the summer.
Quote of the week
“They had been running as a matter of course and then they stopped without any notice. At the end of April we’re like, ‘Where’s the TV?’” -Jeffrey Acton, chair of the Round Table Owners Association, on the chain’s lost television advertising.
On the blog
I wrote about Chi-Chi’s, Chapter 7 bankruptcies, fast-casual value and Wendy’s. Check out all my blog posts on The Bottom Line.
On the podcasts
On A Deeper Dive I spoke with Rich Shank on the state of the restaurant industry. On The Week in Restaurants, Joe Guszkowski and I discussed rebrandings, Wendy’s, Chi-Chi’s and ChatGPT.
For questions, comments or story ideas, send me an email at jonathan.maze@informa.com. And follow me on Twitter at @jonathanmaze. And also LinkedIn. And TikTok.
