In the midst of the worst inflation in decades, two dominant players in the fast-food business are starting to pull away from rivals in a key metric.
Fast-rising costs are forcing most restaurants to boost prices for consumers, adding to the pressure on those trying to figure out how to pay their bills.
As McDonald's MCD CFO Kevin Ozan said in a recent earnings call, "food and paper increases, as well as labor inflation and the competitive environment" was leaving the company with no choice but to raise prices.
So far in 2022, both McDonald's and Chipotle CMG increased the average price of the things on their menu by around 6%.
But in an ironic finding, raising menu prices is, for several popular fast-food chains, not having an impact on the number of people eating there. If anything, higher prices elsewhere are leading more people to choose fast-food as a less expensive option.
Which Fast Food Restaurants Are Seeing The Most Traffic?
And a recent report by data analytics company Placer.ai found that McDonald's and Chipotle remain the most popular in terms of foot traffic.
While people are coming into fast food restaurants overall 5.9% more than a year ago, visits to the Golden Arches rose by 16.7% from June 2021. Chipotle saw its foot traffic rise by 14.6% year over year in June and 23.3% in May.
No other chain -- whether it be Starbucks (SBUX), Yum! Brands (YUM)'s Pizza Hut or Dunkin (DNKN) -- saw such numbers.
"Meanwhile, nationwide visits to fast-casual restaurants in June 2022 were down 0.1% and 7.4%, respectively, on a YoY and Yo3U basis – likely due to consumers cutting back on dining out as inflation intensifies," according to the report.
The two chains' lead is likely to continue as the numbers show that, in the week of July 11, visits were up 8.8% and 6.1% year-over-year at McDonald's.
"Chipotle and McDonald's appear well-poised to continue their success in the second half of 2022," reads the report. "[...] The ongoing strength gives added credibility to the thought that customers may be 'trading down' in food spending – a trend for which McDonald’s is very well aligned."
Inflation, Pandemic And Everything In Between
So far at least, the raised prices have not led to fewer people going to these popular chains — likely because, even when prices go up, fast food still remains the cheapest available option and attracts those who might have, in another year, spent more at a different level of restaurant.
In the U.S., food costs rose by 10.4% between June 2021 and 2022. Specific products like eggs and bacon saw even more dramatic spikes.
A recent study from Omaha-based insurance company Breeze found that 88% of consumers have cut spending in some form due to inflation.
About 73% of U.S. households have cut back on restaurants and takeout, 63% on consumer spending, 62% on social spending, 57% on groceries, 44% on gas, and 35% on their debt payments.
And in what is perhaps the biggest hit to those struggling to get by, it is the cheapest items that are seeing some of the biggest price hikes.
Another Placer.ai report from this spring found that grocery costs at dollar stores spiked by 14.3% from 2021 and 22.5% from 2020. By contrast, online grocery store prices rose by only 12.4% from 2020.
Chipotle recently increased its goal of opening new restaurants to 7,000 across North America in the coming years. It had previously targeted 6,000.
