In a recent report, it is clear that fast food restaurants are winning significantly over other traditional types of restaurants in terms of sales. During the Covid “pandemic,” this would not be surprising, as traditional restaurants closed due to lockdowns. But Covid is largely over, and the trend continues. Perhaps Covid has caused a cultural shift in dining, but perhaps there is something else to consider.
US fast food and other limited service restaurants did not only get through the pandemic better than the restaurant industry as a whole – in high inflation times, affordable, fast food has also been seeing steadily growing sales while other restaurant types could not uphold their post-pandemic growth trajectory. In June, the latest month on record with the Census Bureau, quick service restaurant sales grew by 14.4 percent, while those of other restaurants were down to 9.2 percent year-over-year.
According to Bloomberg, drive-thru services have been aiding fast food chains as they stayed popular beyond the pandemic. In February, US drive-thru sales were 20 percent higher than they had been in the same month two years earlier. Industry publication QSR is even speaking of a new “golden age of fast food” as sales and restaurant numbers are expanding in the sector while also acknowledging headwinds like the hiring crunch.
See this in the chart below and learn more here.
But is it merely about dining choices, or is there something else going on? One has to wonder if people are turning to fast food restaurants because they simply tend to be cheaper in order to adapt to the 40-year high inflation that much of the middle class is experiencing.
Looking at wages by wage level, the poorest are keeping up better than the middle class (higher wage levels) in terms of wage growth, though all wage level groups are losing to inflation. But remember, the poorest wage level are natural customers of fast food as their total wages earned are lower. See this in the chart below and learn more here.
Note that the wage tracker would not track the uber-wealthy, and many of these folks are not in these statistics. One sees this similar pattern when we break down wage growth by age. As one gets older, one tends to become more affluent as one achieves middle-class status from youth. See this in the chart below.
So what is going on in the restaurant industry? The more affluent, who would be more natural customers of more traditional restaurants, are falling further behind in terms of inflation and are being forced to adapt by changing from traditional restaurants to fast food restaurants.
This is merely more evidence the middle class is in decline under the Biden administration and Fed policies of creating 40-year high inflation. This trend will continue – perhaps to the point that it will even begin to affect fast food restaurant sales as well in the future.
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