Fast Food Brands Struggle as Consumer Sentiment Sours

Restaurant stocks have been struggling this summer, though it’s not quite clear why.

As Seeking Alpha reported Sunday (July 21), weakening consumer confidence and consumer spending are likely the key reasons, though there could be another reason diners might be shunning quick-service restaurants, or QSRs.

“Heading into Q2 earnings, we believe sentiment for restaurants is the poorest since GLP-1 concerns gripped the industry late last summer,” BTIG’s Peter Saleh said in a research report, referring to weight loss medications.

He added that the weakness is understandable this time “as the price wars are intensifying amidst significant social media backlash.”

That backlash started last October, when Starbucks faced pressure connected to the Hamas attack on Israel. Then came allegations of price gouging by McDonald’s and inconsistent portions at Chipotle.

“Clearly, consumers are disgruntled by the value proposition across the industry and are pushing back,” Saleh said.

This loss of the “value proposition” which gave QSRs their competitive edge over fast-casual restaurants suggests a “deep and prolonged price war” among not just QSRs, but also with casual dining and fast-casual eateries.

As consumers cut back, restaurants are employing new measures to connect with their consumers, including in virtual spaces. Earlier this month, QSR chain Whataburger announced the debut of its first tournament within online video game Fortnite, where consumers compete to win cash prizes. 

And earlier this year, fast-casual brand Wow Bao partnered with game platform and game creation system Roblox, integrating the platform with its rewards program to enable consumers to earn coupons for physical food items through virtual play.

“By connecting the Roblox community with our online ordering channels and rewards program, we are inviting new customers to experience our brand, rewarding our most frequent guests, and embarking on something that has never been done,” Wow Bao president and CEO Geoff Alexander said in a statement.

“By launching these experiences within popular games, these eateries aim to engage younger audiences in a dynamic environment that offers a degree of immersion that traditional advertising cannot equal,” PYMNTS wrote.

And consumers are willing to experiment with experiences that meld purchasing with their leisure routines. The PYMNTS Intelligence study “How We Will Pay Report: How Connected Devices Enable Multitasking Among Digital-First Consumers” found that, of the 76% of consumers who multitask while engaged in leisure activities, 27% do so to make purchases from restaurants.

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