Toward the end of 2024, there was a growing sense of optimism, however cautious, that 2025 was to be a better year on the consumer side. The end of the election, easing inflation, a generally good jobs market and lower gas prices all seemed to suggest that maybe things would be better in the new year.
They may have to wait a bit longer for that to happen, at least based on some commentary from earnings calls so far, notably from McDonald’s executives this week.
“The overall market is pretty muted,” McDonald’s CEO Chris Kempczinski told analysts on Monday.
Kempczinski described a depressing set of numbers for lower-income consumers, which could be problematic for fast-food chains, which rely more heavily on that group than does the general restaurant industry.
Lower-income consumers were down in the “double digits” in the fourth quarter, and Kempczinski’s comments suggest that environment hasn’t much improved with the new year.
“That’s the landscape that we’re looking to navigate through,” he said. “It’s why it’s so important that we make sure we have a strong value program.”
McDonald’s CFO Ian Borden added that “the industry itself has certainly had a sluggish start” in 2025, “partly due to that low-income consumer.”
Weather is certainly another factor. Chipotle Mexican Grill executives called 2025 “volatile” thus far, largely due to weather. But weather traditionally creates early-year sales headaches, even if these were more severe than normal.
But the comments from McDonald’s suggest there’s something more going on than just bad weather keeping consumers from restaurants. Kempczinski said traffic from middle- and higher-income consumers is “very robust” right now.
Restaurants raised prices upwards of 40% from 2019 to 2024 to offset the soaring cost for food and labor. But that same inflation also squeezed lower-income consumers, and when restaurants kept raising prices, they cut back on dining and expressed their frustration on social media in the process.
That created a weird “trade out” situation as consumers opted to cut back on dining, and that ultimately affected fast-food chains. It prompted a summertime value war as McDonald’s launched its $5 Meal Deal in June—and then re-upped it with the permanent McValue platform starting in January.
Consumer response initially to the deals was modest. But then in October it appeared that chains started to turn things around. Sales and traffic were good in October and November, as brands like Wendy’s and Burger King gained traction with their marketing efforts. McDonald’s did, too, thanks to the Chicken Big Mac, at least until an E. coli outbreak wiped out that momentum.
By December, however, fast-food traffic went back into the red. McDonald’s commentary this week suggests it’s stayed there so far in 2025, even as the chain’s own traffic was “slightly positive” last quarter.
All that means that the difficult operating environment the industry faced in 2024 is still there in 2025, and that the value wars launched to get lower-income consumers to come out to restaurants again are likely here to stay for a while.