Struggling Restaurant Chains Brace for Economic Squeeze as American Diners Cut Back on Dining Out
In recent times, economic worries have led to a notable increase in home cooking among Americans, causing a decline in visits to restaurants, particularly fast-food and casual dining establishments that cater to low-income consumers.
This trend is evident in the sales figures of major chains such as Wendy’s, KFC, and Pizza Hut, which have reported sales declines ranging from about 3.6% to 5% in recent months [2]. The same-store sales have also taken a hit for smaller chains like Good Times Restaurants, with a decline of up to 9% [3].
The economic pressures and changing consumer behavior have intensified the financial strain in the restaurant industry, leading to a peak in restaurant bankruptcies in 2024, particularly among large chains with revenue above $20 million annually [1]. The first half of 2024 showed 28% of all large corporate bankruptcies were in the service sector, with restaurants being notably affected due to thinner margins and heightened competition exacerbated by inflation and reduced discretionary spending [1][5].
Interestingly, despite many consumers claiming they are eating out less as a cost-saving measure, overall restaurant spending per household increased slightly (2.1%) from March to June 2025. However, low-income groups specifically reduced their visits but tended to spend more per visit when dining out, partially offsetting the frequency reduction [4]. Some diners have shifted their preferences from fast-food toward casual sit-down restaurants, often attracted by value meal deals and more meaningful dining experiences despite economic uncertainty [4].
The volatility of Denny’s sales in July was attributed to "macroeconomic changes" [6]. Dine Brands customers, which include IHOP and Applebee's, are cutting back on beverages and appetizers, and opting for less expensive menu items [7]. Chipotle Mexican Grill lowered its sales growth target for the second time this year, citing the impact of the current economic climate on low-income consumers [8].
Despite the challenges, restaurant operators remain hopeful that traffic will rebound before the end of the year. Scott Huckins, CEO of Reynolds Consumer Products, stated that the need for convenient ways to cook and enjoy food at home is growing [9]. In response, Reynolds Consumer Products is expanding its distribution of items for home meals.
Fast-food restaurants have been hit the hardest, with their traffic sliding 2.3% in the second quarter of 2022 compared to the previous year [10]. McDonald's CEO Chris Kempczinski reported a decline in visits from low-income customers, particularly between April and June 2022, due to declining real incomes [11]. To counter this, fast-food chains like Taco Bell and McDonald's have been offering value meals to attract customers seeking savings [12].
The economic impact of US President Donald Trump's tariff scheme and fears of a slowing labor market have discouraged spending, contributing to the decline in restaurant visits [13]. The US Department of Agriculture forecasts that the costs of eating out will continue to rise more quickly than home meals [14]. In 2021, consumers spent $1.1tn on food at home and $1.5tn for food away from home [15].
Despite the challenges, Chipotle Mexican Grill's CEO, Scott Boatwright, remains optimistic, believing that as sentiment improves, the business will improve [8]. Sally Lyons Wyatt, a Circana adviser who focuses on the food service industry, stated that it will take a lot of effort to get consumers more comfortable with spending money outside of their homes, and it's not likely to happen this year [6]. However, the resilience of the restaurant industry and the consumers' love for dining out may ensure a recovery in the near future.
References: 1. Restaurant bankruptcies soar as pandemic, inflation weigh on industry 2. Fast-food chains report sales declines as consumers pull back 3. Good Times Restaurants Reports Second Quarter 2022 Financial Results 4. The Economics of Dining Out 5. Bankruptcy Filings by Large Corporations Reach 28-Year High in First Half of 2024 6. Denny's Q2 sales down, but CEO expects recovery in second half 7. Dine Brands Reports Second Quarter 2022 Results 8. Chipotle lowers sales growth target for second time this year 9. Reynolds Consumer Products Q2 Earnings Call Transcript 10. Fast-food sales are slipping as consumers cut back on dining out 11. McDonald's Q2 Earnings Call Transcript 12. Value meals are back: Taco Bell, McDonald's and others are offering cheap eats 13. Economic concerns weigh on US consumer spending 14. USDA forecasts food-away-from-home prices to rise more quickly than food-at-home prices 15. US consumers spent $1.5tn on food away from home in 2021
- The decline in restaurant visits, particularly fast-food and casual dining establishments, can be attributed to economic worries leading to an increase in home cooking among Americans.
- Inflation and reduced discretionary spending have intensified the financial strain in the restaurant industry, causing a peak in restaurant bankruptcies in 2024, with large chains being significantly affected.
- Personal-finance considerations have led some consumers to shift their dining preferences from fast-food to casual sit-down restaurants, often seeking value meal deals and more meaningful dining experiences.
- In the realm of lifestyle and food-and-drink, the volatility in Denny’s sales is linked to macroeconomic changes, with consumers cutting back on beverages and appetizers, and opting for less expensive menu items.
