Financing

Quick-service restaurants had a tough first quarter

Was it weather? Or was it prices? Either way, fast-food restaurants have started the year off on the wrong foot, according to traffic data.
McDonald's
Sales at restaurants like McDonald's slowed in the first three months of 2024. | Photo courtesy of McDonald's.

Bad weather, and perhaps high prices, kept customers away from fast-food restaurants in the first three months of the year.

That, at least, is based on data from Revenue Management Solutions (RMS), which said this week that traffic at quick-service restaurants declined 3.5% in the first three months of the year, with sales barely positive at 0.8%.

Average prices were up 4% year over year in the period, according to the firm, which tracks sales, prices and traffic data at fast-food restaurants.

The industry can take some solace in the fact that customers weren’t necessarily staying away from restaurants so much as they were kept away: Tough weather, particularly in January, likely influenced that data.

Indeed, delivery is up 10% over the past year, according to RMS, though sales through that relatively new channel have been declining since the third quarter of last year. Delivery sales tend to remain higher during periods of bad weather.

Many brands are also facing difficult comparisons from a year ago, which are proving tough to match.

But restaurants are also the subject of consternation on the part of diners, who see prices rising faster at places like McDonald’s or Five Guys than they are at grocers like Walmart or Kroger. The $20 fast-food wage in California is also highlighting concerns about menu prices.

RMS noted that takeout is up 8.5% year over year and dine-in sales are up 6.3%. But the drive-thru is taking a hit, with those sales down 10.7%.

Industry traffic has been a concern for months, as prices have led customers to cut back on their dining frequency—even as they spend more at restaurants.

The focus on prices on social media has generated attention. Social media users have fretted about prices at places like McDonald’s and Five Guys. There was also the uproar over Wendy’s “dynamic pricing” comments, which itself shed light on consumer frustration over restaurant menu prices.

Yet restaurants have also had little choice. Soaring costs for food and labor have eaten into margins. And though operators have focused on technology and efficiency to improve profitability, there is only so much they can do—particularly at fast-food restaurants that are largely franchised. And so many have raised prices.

There are some signs that the industry is slowing its pricing roll. Prices at limited-service restaurants rose 0.3% in March. That was still higher than the flat prices at grocers. But it was slightly lower than the 0.4% increase in the consumer price index.

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