Dive Brief:
- Fitch Ratings expects a low single-digit increase in food-away-from-home spending in 2025, said Jose Luis Rivas, senior director, North America Corporates at Fitch, during the ICR Conference last week.
- The agency expects traffic to remain relatively flat or decline slightly “due to the cumulative effect of inflation as well as the expectations for a cooling labor market,” Rivas said. Average check growth will remain in line with inflation, which Rivas said was similar to projections shared during brand presentations at the event.
- Companies improved their menu mixes and invested in technology like artificial intelligence to support their operations in 2025, Rivas said.
Dive Insight:
Last year, restaurants endured a myriad of challenges, including a 20% increase in bankruptcy filings due to legacy debt and/or costly leases, Rivas said. Unit economics were impacted by food inflation and labor costs, higher menu prices and lower traffic in addition to lower consumer spending, Rivas said. Restaurants responded by slowing their growth plans and/or closing locations, streamlining menus and operations and offering various discounts.
Many of these challenges are expected to persist in 2025. The unemployment rate will likely increase to the mid-4% range, slightly above the 4.1% noted at the end of last year, Rivas said. Consumers will still pull back on discretionary spending and become more cautious and selective when they decide to dine out, which aligns with what other experts have predicted about consumer behavior. Real wages will remain stable, or slightly positive, but will not be enough to boost disposable income, he added.
Fitch expects the QSR segment to perform better than full-service restaurants given these conditions.
“Companies that excel on customer service, that are able to deliver a strong value proposition, are more likely to drive traffic to their stores,” Rivas said.
Revenue Management Services already noted a slight uptick in traffic across the QSR segment last quarter, with spikes in October and November with the continuation in value offerings.
Many chains already updated their menus with low-cost options in January, including the launch of McDonald’s McValue platform, additions to Del Taco’s RealDeal$ menu and a $5 and $9 price points for Taco Bell’s Luxe Cravings Boxes. Other chains like Portillo’s, Shake Shack, Church’s Texas Chicken and Darden are leaning into technology investments to improve operations.
