Restaurant chains face challenges as U.S. consumers eat at home

As U.S. consumers tighten their belts amid economic uncertainty and persistent high prices, restaurant chains are struggling with declining sales, the Financial Times reported on Saturday.

Companies like Dine Brands (IHOP and Applebee’s) (DIN), Sweetgreen (SG), Wendy’s (WEN), Denny’s (DENN) and Chipotle (CMG) have all reported weaker sales, citing a shift toward home-cooked meals as consumers try to save money. Market research firm Circana found that Americans ate 1 billion fewer meals at restaurants between January and March compared with a year earlier.

McDonald’s (NYSE:MCD) Chief Executive Chris Kempczinski noted a drop in visits from low-income customers, particularly those affected by declining real wages. He explained that customers are skipping meals or opting for cheaper items or cooking at home. Denny’s (DENN) executives described a volatile sales environment, calling it a “choppy consumer environment” driven by macroeconomic factors, including the labor market slowdown and tariffs.

In response, chains are offering value meals to attract customers, such as Taco Bell’s “luxury cravings boxes” and McDonald’s (NYSE:MCD) $5 meal deals, with mixed results. However, restaurant visits have fallen 1% this year, with fast-food establishments seeing the steepest declines.

Industry expert Sally Lyons Wyatt remarked that consumers are highly leveraged and unlikely to increase spending on dining out this year. As consumers dine out less, they’re cutting back on extras like drinks and appetizers, while opting for more affordable menu options.

Despite some slowing in food inflation, eating out is still more expensive than cooking at home. The U.S. Department of Agriculture forecasts that the cost of dining out will continue to rise faster than at-home meals.

Some companies, such as Reynolds Consumer Products (REYN), are capitalizing on the trend by expanding their distribution of home-cooking items. Meanwhile, restaurant operators remain hopeful for a rebound in consumer sentiment and traffic by year’s end, though many are preparing for continued challenges in the short term.