US restaurant chains face slump amid record gasoline prices
May 4 (Reuters) — Major U.S. restaurant chains, including Wingstop and Domino’s, reported weaker-than-expected sales growth this quarter as soaring gasoline prices force consumers to cut back on discretionary spending.
The surge in fuel costs is tied to the U.S.-Israeli war on Iran that began in February, causing massive disruptions to global oil supplies. According to GasBuddy.com, the average U.S. gas price has hit $4.43, a nearly 40% increase from last year, with prices in California exceeding $6, News.Az reports, citing Reuters.
Impact on sales and forecasts
The impact on the industry has been significant. Wingstop saw an 8.7% plunge in quarterly same-store sales, while Domino’s reported a lower-than-expected 0.9% growth. Even Chipotle, which posted a slight growth of 0.5%, maintained a flat outlook for the rest of the year due to market uncertainty.
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Analysts from Revenue Management Solutions indicate that $4.00 per gallon acts as a tipping point; once crossed, the decline in restaurant visits doubles. They estimate that if prices reach $5.10, fast-food traffic could drop by 3%, potentially costing a single drive-through location $22,000 in lost annual sales.
The shift to value and "affordable indulgence"
To combat declining traffic, chains are leaning heavily into discounts. Taco Bell reported 8% growth following the launch of a $3 value meal. Meanwhile, Starbucks saw a 7.1% increase, with CEO Brian Niccol noting that lower-income consumers are turning to the chain's beverages as a form of "affordable indulgence" instead of more expensive luxuries like vacations.
Wall Street remains pessimistic, with the LSEG U.S. restaurant index dropping 5% since the war began, erasing over $40 billion in market value. Investors are now looking to McDonald’s earnings on May 7 as the next major indicator for the sector's health.
By Leyla Şirinova
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