AS US CONSUMERS tighten their wallets, budget-friendly restaurant chains such as McDonald鈥檚, Chili鈥檚 and Domino鈥檚 are emerging as winners, drawing more diners who are trading down to cheaper meals.
The shift is leaving pricier fast-casual chains, including Chipotle Mexican Grill, and Mediterranean-inspired Cava and Sweetgreen, struggling to retain customer visits, particularly among 25- to 35-year-olds.
While quick-service chains such as McDonald鈥檚 offer low-cost meals with greater focus on fast takeaway and drive-thru options, fast-casual restaurants focus on fresher, high-quality ingredients, and a more relaxed dining atmosphere at slightly higher prices.
Chipotle CEO Scott Boatwright acknowledged on a post-earnings call last week that the sector was 鈥渙ut of favor鈥 and often perceived as overpriced. He added he was working to reframe Chipotle鈥檚 value proposition after internal studies showed customers don鈥檛 consider the chain as affordable as other dining options.
Sticky inflation, elevated menu prices and an uncertain economic backdrop are pushing US households in the low- to mid-income tiers to rethink eating out. Younger diners are feeling the pinch from rising youth unemployment, resumed student loan payments and sluggish wage growth.
In the third quarter of 2025, visit frequency declined across all restaurant segments 鈥 cheap quick-service chains, more expensive fast-casual outlets and the pricey full-service restaurants 鈥 compared to the previous three months, according to data from consulting firm Revenue Management Solutions.
Brinker鈥檚 flagship brand Chili鈥檚 is gaining ground with low-income diners even as rivals reported a sharp pullback. On an analyst conference call last week, CEO Kevin Hochman credited the chain鈥檚 鈥渂etter than fastfood鈥 marketing for driving growth among households earning under $60,000.
Chili鈥檚 is winning back customers by promoting value-focused items like its Triple Dipper appetizers and $10.99 burger, backed by strong TV and social media campaigns, said Northcoast Research analyst Jim Sanderson.
Burger King, owned by Restaurant Brands, also enjoyed traffic growth in the latest quarter, driven by its value offerings, including the 鈥2 for $5鈥 and 鈥3 for $7鈥 meal deals.
鈥淥ne of the biggest dividers between the fast-casual and (quick-service) markets is the labor costs are vastly different. That eats away at margins and as some franchises have increased prices to cover those costs… but that has further pushed low-income diners to the value offered at the drive-thrus,鈥 said Brian Mulberry of Zacks Investment Management, an asset management firm.
Domino鈥檚 CEO Russell Weiner told Reuters last month that the pizza giant鈥檚 scale allows it to have 鈥渟ustained value that鈥檚 profitable, unlike other folks who are probably spending away their balance sheet to keep up,鈥 he said.
Rising beef costs, worsened by tariffs, are squeezing margins across the industry. Executives at Chipotle, Restaurant Brands and McDonald鈥檚 have flagged the spike in beef prices as a key pressure point, given its prominence on their menus.
For the next 12 months, McDonald鈥檚 price-to-earnings ratio, a common benchmark for valuing stocks, is 22.87, compared to an industry median of 14.37. Cava鈥檚 ratio is much higher at 81.43. 鈥 Reuters
