Inflation Or Weight-Loss Drugs: What Is Causing Fast Food’s Foot-Traffic Decline?
Traffic went from a 0.8% dip in July to a 4.2% drop in September.
Foot traffic at fast food restaurants was progressively worse from July to September, according to Placer.ai numbers recently published in Reuters.
Overall, traffic went from a 0.8% dip in July to a 4.2% drop in September.
Even McDonald’s, KFC, and Taco Bell showed declines late in that period after holding up at the start of the quarter. They ended the period with declines of 3.7%, 2.1%, and 1.2%, respectively.
This can be partly explained by fast food’s higher inflation rate (by as much as 360 basis points according to Wells Fargo) compared to food purchased to cook at home.
But could another factor be at play as well?
Like with most food-related industries, questions are growing about the impact weight-loss drugs such as Ozempic, Wegovy and Mounjaro may be having on fast food consumption.
“Appetite-suppressing drugs like Ozempic and Wegovy will spark a fundamental change in food consumption patterns and hurt demand for burgers and fried chicken,” writes Reuters’ Deborah Mary Sophia.
Restaurants have stopped raising prices and are offering extra promotions to get customers through the door, Reuters reported, which could take a bite out of the margin gains that most chains likely saw in the July-September quarter, due to easing costs.
But some stock market analysts say it is too early to quantify the impact of these drugs on restaurants’ sales, according to the Reuters report.
And it should be noted that brands that cater to consumers with higher incomes such as Chipotle and Starbucks didn’t experience the same dip as fast food outlets did, according to Placier.ai. For Chipotle, September visits were up 4.7% YoY, Placer.ai said, but adds that that 4.7% YoY growth “is significantly lower than the double-digit monthly visit increases seen earlier in the year.”