The investment logic of US stock catering industry is shifting towards "downgrading consumption": Affordable fast food is rising against the trend, while high-end leisure brands are under pressure.

As American consumers tighten their spending, affordable chain restaurants like McDonald's Corporation (MCD.US), Domino's Pizza (DPZ.US), and Brinker International, Inc.'s Chili's are standing out, attracting more customers looking for low-priced meals. This shift has made it difficult for higher-priced chain restaurants to retain customers, including Chipotle Mexican Grill, Inc. (CMG.US), Mediterranean-style Cava (CAVA.US), and Sweetgreen (SG.US), especially among the age group of 25 to 35. Fast food chains like McDonald's Corporation provide low-priced meals with a focus on quick take-out and self-service, while fast casual restaurants emphasize using fresher, higher-quality ingredients and creating a more relaxed dining atmosphere, albeit at slightly higher prices. Chipotle Mexican Grill, Inc.'s CEO, Scott Boatwright, acknowledged during last week's earnings conference call that the industry is experiencing a "decreased popularity" and is often perceived as overpriced. He also stated that after internal research, they are working on repositioning Chipotle Mexican Grill, Inc.'s value proposition because internal data shows that customers do not perceive the restaurant as affordable compared to other dining options. Sticky inflation, rising menu prices, and an uncertain economic background are prompting lower-income families in the U.S. to rethink dining out. Young consumers are feeling the pressure due to rising youth unemployment, student loan repayments, and slow wage growth. According to data from consulting firm Revenue Management Solutions, in the third quarter of 2025, visit frequency in all sectors of the restaurant industry in the U.S. has declined compared to the previous three months, including affordable fast-service chains, slightly higher-priced fast-casual restaurants, and higher-priced full-service restaurants. Brinker International, Inc.'s flagship brand, Chili's, is gradually winning over low-income consumers, while its competitors are experiencing significant declines in performance. During an analyst conference call last week, the company's CEO, Kevin Hochman, attributed the chain's "better than fast food" marketing strategy to its growth performance in households with an annual income below $60,000. Northcoast Research analyst Jim Sanderson stated that Chili's is winning back customers by promoting cost-effective products like their "three-dip appetizers" and $10.99 hamburgers, and leveraging strong TV and social media advertising campaigns. Restaurant Brands International, Inc.'s Burger King also experienced an increase in customer traffic in the recent quarter, thanks to its value offerings, including combo deals like "buy two for $5" and "buy three for $7". Brian Mulberry of asset management company Zacks Investment Management said, "The biggest difference between the casual dining and fast-service market is the significant difference in labor costs. This will erode profit margins, and some chains have raised prices to compensate for these cost increases...but this further pushes lower-income consumers towards value products in the fast-service sector." Domino's Pizza CEO Russell Weiner stated last month that the pizza giant's scale allows it to maintain "consistent profit value," while other companies may struggle to sustain this due to excessive indebtedness. He said, "Due to the impact of tariffs, beef prices continue to rise, squeezing profit margins across the industry." With tariffs causing beef prices to rise further, profit margins across the entire industry are being squeezed. Executives at Chipotle Mexican Grill, Inc., Restaurant Brands International, Inc., and McDonald's Corporation all view the soaring beef prices as a key pressure point as beef plays a significant role on their menus. In the next 12 months, McDonald's Corporation has a price-earnings ratio (a common measure of stock value) of 22.87, while the industry average is 14.37. Cava's price-earnings ratio is much higher at 81.43.