Industry-wide, fast food restaurants have seen traffic from one of its core customer bases, low-income households, drop by double digits, McDonald's chief executive Christopher Kempczinski told investors last week. Meanwhile, traffic from higher-earners(*) increased by nearly as much, he said.
"Happy Meals at McDonald's are prohibitively expensive for some people, because there's been so much inflation," Josephson said.
Prices at limited-service restaurants, which include fast-food restaurants, are up 3.2% year over year, at a rate higher than inflation “and that’s climbing” said Marisa DiNatale, an economist at Moody's Analytics.
A recent earnings report from Delta offers yet another illustration. While Delta's main cabin revenue fell 5% for the June quarter compared to a year ago, premium ticket sales rose 5%, highlighting the divide between affluent customers and those forced to be more economical.
At hotel chains, luxury brands are holding up better than low budget options. Revenue at brands including Four Seasons, Ritz-Carlton and St. Regis is up 2.9% so far this year, while economy hotels saw a 3.1% decline for the same period, according to industry tracker CoStar.
Consumer credit delinquency rates show just how much low-income households are hurting, with households that make less than $45,000 annually seeing "huge year-over-year increases," even as delinquency rates for high- and middle-income households have flattened and stabilized, said Rikard Bandebo, chief strategy officer and chief economist at VantageScore.
--
(*) President Donald Trump constructed his own mega McDonald’s sandwich while eating from the fast food restaurant chain on the 2024 campaign trail,
according to Republican National Committee chair Joe Gruters.
“He had hot fries waiting for him from McDonald’s ... And then he had a Filet-O-Fish, a Quarter Pounder, and a Big Mac, and I think he combined two of them,” said Gruters, who did not reveal which two sandwiches Trump put together.