Third-quarter earnings calls gave us a glimpse into how some brands are feeling about the current environment, and what they’re doing to manage through it

There hasn’t been much positive news in recent weeks, especially if you consider yourself a consumer. October layoffs reached a 22-year high. Calls to the national hotline for food assistance have quadrupled so far this month.

Consumer sentiment scores dropped to a three-year low in November.

Indeed, “challenging macro backdrop” was the phrase of the third quarter earnings round, repeated by executives from Domino’s, Restaurant Brands International, and Chipotle, with a handful of other companies identifying pronounced pressures among lower-income and younger consumers. It’s certainly not a new trend, but it seems to be showing signs of acceleration.

Here is a look at how some public restaurant companies and different segments are making sense of — and responding to — such an environment.

Pizza

Pizza has historically been a winner in a soft consumer environment, but warning signs are flashing in the category. Pizza Hut’s same-store sales fell 6%, while parent company Yum Brands announced it is “exploring strategic options” for the chain, including a potential sale.

Domino’s had a strong quarter, but chief financial officer Sandeep Reddy said his company is starting to see slowing in Q4 relative to Q3.

“If it intensifies even further … That could put pressure on our full-year same-store sales number,” he said. “The macro, if it gets incrementally worse, could be a pressure.”

To continue gaining market share, Domino’s is leaning into its promotions such as its Best Deal Ever, which are driving profitable business, according to executives.

Papa Johns’ CFO Ravi Thanawala said his company is experiencing some trade-off decisions in favor of eating at home, as well as slightly higher pullback among younger consumers. The company is pulling levers such as 50%-off carryout deals and promoting dipping sauces. CEO Todd Penegor added that the company is developing “more compelling sides and desserts at more accessible prices.”

Quick service

McDonald’s executives have acknowledged an increasingly bifurcated consumer base within the quick-service segment, with lower-income consumer traffic declining by nearly double digits in the third quarter. Conversely, QSR traffic among higher-income consumers has increased by nearly double digits. CEO Chris Kempczinski said this trend has persisted for nearly two years and is expected to continue “well into 2026.”

“We continue to remain cautious about the health of the consumer in the U.S.,” he said. “Delivering industry-leading value is part of McDonald’s DNA. … And especially in today’s difficult macro environment, it’s more important than ever.”

McDonald’s has responded by sharpening its value offerings, including the return of Extra Value Meals, and promoting those offerings prominently on menu boards.

Restaurant Brands International CEO Josh Kobza said his brands — including Burger King and Popeyes — have experienced a “bit softer relative performance” from lower- and middle-income consumers throughout the past year. He said staying consistent with value messages has helped insulate Burger King in a competitive environment.

Wendy’s, meanwhile, experienced a tough quarter of -4.7% same-store sales. Interim CEO Ken Cook said this result “reflected higher consumer pressure,” which is expected to persist throughout the remainder of the year. The company’s plan to push through this environment is to focus on its Biggie Bag value offerings. Wendy’s is also working with a consulting firm to segment customer data to provide more effective communication.

Casual dining

Chili’s, which has been a clear winner in recent quarters with sustained double-digit comp sales, is gaining customers among households with income levels below $60,000, which is an anomaly right now.

During his company’s recent earnings call, chief executive officer Kevin Hochman said the casual-dining chain’s “Better than Fast Food” campaign, launched more than two years ago, continues to resonate with value-seeking consumers.

“We are gaining market share with low-income households while others are reporting softness with that group,” he said.

Further, younger consumers are coming into Chili’s more often because of fresh marketing campaigns, Hochman said.

Chili’s competitor Applebee’s experienced some check management during its most recent quarter, with guests trading down to lower price items, according to CEO John Peyton. That said, the company generated positive sales and traffic from new menu innovation and targeted marketing campaigns.

“All of our guests are hyper-focused on value … That focus on value is what’s going to be on consumers’ minds throughout the rest of this year and into next,” Peyton said, adding that Applebee’s 2 for $25 value offering is driving traffic.

“It’s the match that consumers are looking for.”

Fast casual

As casual-dining concepts gain favor from those younger consumers, it could be to the detriment of fast-casual concepts. Chipotle CEO Scott Boatwright said his company has experienced a “broad-based pullback in frequency across all income cohorts.” Guests with household incomes below $100,000 represent about 40% of Chipotle’s total sales, while consumers aged 25 to 35 represent about 25% of total sales.

“This (younger) group is facing several headwinds including unemployment, increased student loan repayment, and slower real wage growth. We tend to skew younger and slightly over-index to this group relative to the broader restaurant industry,” Boatwright said.

Meanwhile, CAVA’s traffic was flat, while its same-store sales were slightly positive, but below expectations. During his company’s earnings call, CEO Brett Schulman said younger guests are making more deliberate choices on where to spend.

“You can look at the data … Whether it’s student loan repayment, consumer sentiment, the inflationary pressures all around them, health care costs, housing costs … Gen Z unemployment twice the national average,” he said. “They don’t have the vigor or the frequency of occasions that they did last year.”

In response, CAVA is doubling down on its customer experience by bolstering staffing levels and training, deploying tools that make team members’ jobs easier, and communicating its differentiators and value proposition.

Meanwhile, Sweetgreen’s same-store sales and traffic fell by 9.5% and 11.7%, respectively. CEO Jonathan Neman said the chain was impacted in part by lighter spending among younger groups, “particularly the 25- to 35-year-old age group, where we overindex,” he said.

Wingstop is lapping some near-impossible comps but has also recently struggled with pockets of softness. CEO Michael Skipworth said Hispanic and low-income consumers have pulled back, while middle-income consumers are also tightening up in some markets.

On the positive side, he believes this is a temporary consumer environment.

“We see growth in our largest daypart as dinner as an example. The fastest-growing cohort within our database is those with $75,000 household income and above. So, there’s some encouraging data points,” he said.

Speaking of encouragement, Shake Shack is incorporating current consumer challenges into its investment strategy. CEO Rob Lynch said his team isn’t talking about the macroenvironment but rather how to take advantage of the environment.

“They’re talking about how we can serve our guests better. They’re talking about how we can get faster. They’re talking about how we can get better at deploying our labor where it needs to be. They’re talking about how we can extend hours to better service our guests where it makes sense,” he said. “This environment is the time to take share. When there’s a challenging environment, that’s the time when great companies get better.”

Contact Alicia Kelso at Alicia.Kelso@informa.com

Source https://www.nrn.com/restaurant-insights/how-restaurant-chains-are-responding-to-mounting-consumer-pressure