The current restaurant earnings season has largely been a parade of bad sales results, unless you happen to be Chili’s or Taco Bell.
So it was hardly a surprise to see McDonald’s report a 3.6% decline in U.S. same-store sales in the first quarter, its third decline in the past four quarters, and its worst performance since the depths of the pandemic.
Plenty of issues influenced that number, including comparisons with a quarter that featured a Leap Day, and bad weather for much of the period. But according to McDonald’s executives, the consumer is simply not in a good spot right now, and it’s a bigger problem for fast-food chains.
“Geopolitical tensions added to the economic uncertainty and dampened consumer sentiment more than we expected,” CEO Chris Kempczinski told analysts on Thursday. “We believe McDonald’s can weather these difficult conditions more than most. However, we’re not immune to the volatility in the industry or the pressures consumers are facing.”
Much of the restaurant universe is feeling those same pressures. Pizza chains Pizza Hut and Domino’s both reported declining same-store sales, as has the chicken chain KFC and the burger chain Habit. Jack in the Box and Del Taco pre-released negative same-store sales. Starbucks same-store sales also declined, taking its surprisingly weak period into its second year.
Fast-food has been generally weak for more than a year. What might be more alarming is the way previously strong concepts are also seeing weakness, including Chipotle Mexican Grill and Wingstop. Shake Shack on Thursday reported weaker-than-expected sales in the first quarter, too. Fast-casual chains such as those have been outperforming fast-food concepts. They’re now in the same boat.
The economy has clearly taken a hit early in 2025, as President Trump’s tariff plans hammered the stock market and consumer confidence plunged. The economy shrank 0.3% in the first quarter, according to the U.S. Bureau of Economic Analysis.
Consumer spending increased in March, but economists largely attributed that to a pre-tariff rush on major goods like automobiles.
The impact of declining consumer sentiment has not been evenly spread among consumers. Wingstop executives, for instance, suggested the impact is felt more in some regions of the country than others. And Kempczinski said income matters, too.
Traffic in the quick-service sector from low-income consumers was down “nearly double digits” compared with a year ago. Yet that traffic challenge has now spread to middle-income consumers that had previously been spending. Higher-income diners are still going out.
“Low- and middle-income consumers, in particular, are being weighed down by the cumulative impact of inflation and heightened anxiety about the economic outlook,” Kempczinski said.
McDonald’s and other fast-food brands have always overindexed to lower-income consumers, who cut back on restaurant spending last year because of higher prices. That this slowdown has spread to the middle class is the most discouraging comment of all and can help explain challenges at Chipotle and Wingstop.
Kempczinski said that traffic at McDonald’s was down in the morning, which he called a “bellwether daypart occasion.”
“You’re seeing people choosing either to skip breakfast or they’re choosing to eat at home for breakfast,” he said.
He also dismissed suggestions that fast-casual chains and casual-dining brands are responsible for quick-service sales problems. Those sectors simply aren’t big enough.
“The relative size of the QSR industry versus fast-casual, for instance, or casual-dine, the math just doesn’t work,” he said. The quick-service sector dwarfs the casual-dining sector—notably chains that are surging such as Chili’s.
“I don’t think it’s really accurate to say that this is just a shift amongst the different components,” he said.
In short, consumers are simply dining out less often. And that’s been tough on an increasingly broad segment of the restaurant industry.
“The big thing is people are just visiting less,” McDonald’s CFO Ian Borden added. “And that speaks to pressure on consumers.”
The good news for restaurants is that a good marketing effort can change that. McDonald’s is gaining customers thanks to its Minecraft Movie promotion and expects results from chicken strips and then a Snack Wrap. But that will likely come at the expense of someone else. The consumer simply isn’t visiting restaurants that much right now.