Skyrocketing prices at American fast food chains and restaurants are already making people on lower income levels uneasy. The Zhitong Finance App learned that executives of fast food chains, including McDonald's (MCD.US) and WEN.US (WEN.US), recently said they are worried about losing the businesses of consumers with the tightest budgets.

According to a survey conducted by consulting firm Revenue Management Solutions in February of this year, about a quarter of low-income consumers (with an annual income of less than 50,000 US dollars) said they have reduced their fast food intake; about half of low-income consumers said they have reduced the number of times they go to fast casual and full-service restaurants.

The rise in food prices has encouraged budget-conscious consumers to cut expenses. The data shows that from January 2021 to January 2024, food prices, whether consumed at home or in restaurants, rose 20%, the fastest increase on record. According to a recent survey, half of those earning less than $35,000 a year have trouble coping with daily expenses, and nearly 80% are moderately or very pressured by recent price increases.

In the Federal Reserve's latest Beige Book, 7 out of 12 Federal Reserve regions report that low-income consumers are changing their spending habits to find bargains or seek more help from community groups. Additionally, according to the latest US Census data, about one-third of black American households and 21% of white American households earned less than $35,000 in 2022.

For fast food companies, low-income consumers are an important part of their customer base and a weather vane for long-term trends. This group is usually the first to cut expenses and the last to resume spending.

However, fast food companies may not pursue customers as hard as they did in the past, as sales are still supported by rising prices even if traffic falls. SignalFlare CEO Mike Lukianoff, a senior fast food industry consultant, said fast food companies aren't “in a hurry to put traffic above profit like they were ten years ago.”

For example, in 2008, Subway launched a $5 sandwich across the US, which became a signature product during the economic downturn. This prompted competitors to launch highly discounted products for budget-conscious customers. In 2016, after experiencing a long period of sluggish sales, McDonald's launched a package called “McPick 2,” which allows customers to choose two products at a price of $2. A few months later, Wendy's Burger and Burger King both launched a $4 discount package, while Pizza Hut launched a $5 “flavor menu.”

However, in February of this year, McDonald's executives told investors that the company would rely on the existing “value menu” to attract low-income consumers, who may prefer to eat packaged food at home. McDonald's CFO Ian Borden said that affordability is at the core of the brand, and the company will continue to develop its value products. McDonald's CEO Chris Kempczinski said, “Of course, McDonald's' battleground 'is low-income consumers.” He was referring to people earning less than $45,000 a year.

Industry analysts said that today, fast food chains are no longer completely cutting menus and offering big discounts, but are more picky, targeting specific groups of people or limiting discounts to specific meal times or ordering channels (such as apps or door-to-door food delivery).

Wendy's recently launched a limited-time $1 burger that customers can only buy through its app. Gunther Plosch, the company's chief financial officer, said in February that among low-income customers, the company's traffic had declined, but its share of the overall market had not changed.

For large fast food companies, loyalty apps are the go-to strategy for major brands to increase retention rates and average spend. For example, McDonald's often offers discounts within its apps, such as 20% off orders or free food delivery when the order is big enough. David Henkes, senior director of research firm Technomic, said the benefit of the chain is that they obtain more transaction data and demographic data for consumers.

Domino's Pizza (DPZ.US) CEO Russell Weiner said in January that the company was halving the minimum purchase price to receive loyalty program points from $10 to $5; the company was also reducing the number of purchases required to receive free pizza from 6 to 2. “Essentially, we're making this brand more accessible to low-income consumers,” Russell Weiner said.

Of course, not every restaurant chain has seen the weak performance of low-income customer groups. David Gibbs, CEO of YUM.US (YUM.US), told investors in February that the company's restaurant brand Taco Bell sells burritos for $1.4 at many stores in San Antonio, and that the brand does a better job than other stores in low-income markets.