Fast Food Price Hikes See Lower-Income Diners Cutting Back

Rising prices at fast food eateries and other restaurants reportedly have lower-income diners pulling back.

Around a quarter of low-income consumers — those who make under $50,000 a year — said they were eating less fast food, while roughly half said they were making fewer trips to fast-casual and full-service restaurants, Reuters reported Wednesday (March 27), citing data from consulting firm Revenue Management Solutions.

The cutbacks come amid a jump in the price of food, which rose 20% between January 2021 and January of this year, the fastest jump ever recorded, Reuters said.

The report also points to a recent census Household Pulse Survey showing half of people earning below $35,000 a year had difficulty paying everyday expenses, and close to 80% were moderately or “very” stressed by recent price hikes.

And as noted here earlier this month, lower-income consumers are facing a range of pressures. Buying a home has become harder, and “the cost of food and other essentials continue to bite into paychecks and pandemic-era savings.”

In addition, PYMNTS Intelligence found that unanticipated expenses have been hindering financial progress for many consumers, especially for the credit-marginalized consumers who have found their access to traditional credit products to be challenging.

Additional research by PYMNTS has shown consumers rethinking their nonessential spending amid ongoing high prices at the grocery store.

According to the PYMNTS Intelligence study “The New Reality Check: The Paycheck-to-Paycheck Report,” 68% of consumers who live paycheck to paycheck and have trouble paying their bills say they have found themselves making tradeoffs between “essential” items and those they see as “nice-to-have.”

“Things aren’t much better for paycheck-to-paycheck consumers who say they can comfortably manage their expenses,” PYMNTS wrote earlier this month. “Sixty-one percent of the latter group also find themselves saying ‘no’ to nice-to-have items in favor of essential groceries.”

In the face of these troubles, industry analysts tell Reuters that fast food chains are either targeting discounts to specific demographics or limiting them to specific times or channels (such as app purchases or deliveries).

McDonald’s executives told investors in February that the chain would rely on its “value menu” to appeal to low-income consumers who might otherwise be tempted to opt for packaged food at home.

“The battleground is certainly with that low-income consumer,” McDonald’s CEO Chris Kempczinski told investors, in this case meaning diners making less than $45,000.