America's K-shaped economy has turned restaurant winners and losers upside down

"However, in today's K-shaped economy, analysts say that the old playbook is breaking - and some of the biggest chains are finding that even price cuts aren't bringing customers back. "We have a consumer that's cutting back on dining, and that's been happening for really, probably two and a half to three years," Restaurant Business editor in chief Jonathan Maze told Business Insider. "So we now see a large number of chains that are using a discount strategy as a crucial form of marketing.""

"The deals aren't just louder - they're becoming structural. In the past year, 29% of all foodservice traffic was driven by a deal, the highest rate recorded in 50 years, according to Circana's recent report on foodservice trends. At the same time, menu prices have surged. Average menu prices increased 31% between February 2020 and April 2025, according to the National Restaurant Association's analysis of Bureau of Labor Statistics data, putting pressure on consumers who rely on fast food as an everyday option."

"That combination helps explain why the K-shaped spending split has looked "atypical" in restaurant earnings, as Bank of America analyst Sara Senatore told Business Insider in an email: "Restaurants have been reporting softer demand among low-income households for the past two years. At the same time, spending by high-income households has continued to grow. That's part of why casual diners have outperformed QSRs.""

Fast-food consumption no longer reliably rises in downturns because the K-shaped economy produces uneven spending. Lower-income households have cut back on dining for roughly two to three years, while higher-income household spending has grown, lifting casual dining. Discounting has become structural: nearly 29% of foodservice traffic last year was driven by deals, the highest in 50 years. Menu prices rose about 31% from February 2020 to April 2025, increasing pressure on everyday fast-food customers. Heavy discounting is central to many quick-service chains' marketing but risks margin erosion and may not restore long-term traffic.

Read at Business Insider