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Fast food joints face uncertainty as low income consumers pull back on spending

A quarter of consumers making less than $50,000 a year said they were eating less fast food: survey.
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We all know inflation is affecting everything from grocery prices to dining costs and even the humble cup of coffee. In January, food prices were up 20% from January 2021, Reuters reported.

Even fast food chains are feeling the pinch, and they’ve passed on higher prices to their customers. Now, executives at several fast food companies, including McDonald’s and Wendy’s, are getting concerned about low income consumers pulling back on spending.

According to a February survey from consulting firm Revenue Management Solutions, a quarter of low-income consumers, aka those making less than $50,000 a year, said they were eating less fast food. And half of the respondents said they were frequenting fast food joints and full-service restaurants less often.

The findings are especially troubling to fast food retailers, as low income consumers make up a significant chunk of their customer base, but executives are dealing with the shifts by being strategic about their promotions.

Things might get even trickier for fast food restaurants in California, which this week raised the minimum wage for fast food employees to $20 per hour.

This marks a 25% pay hike for many workers, per NPR, and it impacts major chains from McDonald’s and Pizza Hut to KFC and Starbucks.

Following the ruling, some California owners of franchises including McDonald’s and Jack in the Box said they’ll have to raise prices, and some small businesses may have to close. This puts the restaurants in a difficult position, as once they raise prices, it’ll likely push low income consumers further away.

Retail news that keeps industry pros in the know

Retail Brew delivers the latest retail industry news and insights surrounding marketing, DTC, and e-commerce to keep leaders and decision-makers up to date.