The U.S. war with Iran pushed average gas prices past $4.50 a gallon, sending consumer sentiment to a new record low. Pizza orders disappeared first, then sit-down dinners. Now restaurant CEOs are saying out loud that a tank of gas is reshaping where Americans eat - and which chains end up bigger when the dust settles.
Dine Brands, the parent of Applebee's and IHOP, says it knows the exact pain point. "We know that when gas prices start to go past $3.50, that affects that guest for us," CEO John Peyton told CNBC, adding that March and April were softer than the start of the year as value-focused diners stayed home.
Gas is now sitting roughly a dollar past that line. A Numerator survey found 43% of drivers have already pulled back on dining out and takeout since prices started rising. Industry-wide traffic fell 2.3% in March from the year before, according to Black Box Intelligence.
Applebee's response: rush out an all-you-can-eat deal. Starting Monday, $15.99 gets diners unlimited shrimp, boneless wings, riblets, and fries.
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Not every chain is hurting. Chipotle posted a surprise same-store sales bump last quarter and said sales picked back up after a soft March. Shake Shack barely flinched, with CEO Rob Lynch noting only a small softening in the back half of the month.
Burger King grew U.S. same-store sales by 5.8% last quarter, outpacing both McDonald's and Wendy's. McDonald's still posted 3.7% same-store growth, helped by a "barbell" strategy that pushes value menus to cash-strapped diners and full-price promotions to higher-income ones. CEO Chris Kempczinski said high gas prices "disproportionately impact low-income consumers" and that the pressure on that group is likely to keep going.
The middle of the menu is where it hurts most. Casual dining chains - where checks run higher than fast food but the vibe isn't premium - are watching customers either trade down or skip the meal entirely.
Outback Steakhouse owner Bloomin' Brands, Wendy's, and Sweetgreen all said sales picked up sequentially in March compared with earlier in the quarter, helped by a break from winter storms. Even so, all three saw traffic shrink across the first three months of the year, a sign the underlying pressure hasn't gone anywhere.
Chili's owner Brinker International says it's grabbing share as smaller casual rivals shrink. "I think the strong players are going to get stronger," CEO Kevin Hochman said, after watching Chili's diners skip drinks and appetizers in late April.
Three things to track over the next two earnings cycles:
If pump prices stay north of $4, the gap between winners and losers gets wider.
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