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Why McDonald’s Success Sets Off Economic Alarm Bells
Restaurants are pivoting to drive-thrus—but it’s a foreboding economic indicator
If you’re looking to find somebody who is optimistic about the future, you might want to ask a McDonald’s franchisee. According to the latest survey of that group by Kalinowski Equity Research, they’re more upbeat than they have been in over a decade. The caveat is that they’re optimistic about the future of McDonald’s.
And Mickey D’s, which saw Q3 U.S. sales rise 5% and shares rise over 16% for the year, isn’t alone. Domino’s, Papa John’s, and Wingstop all recently announced same-store sales up by double digits in the third quarter of 2020, the Wall Street Journal reports, even as independent restaurants have gotten creamed.
This is quite a reversal. As recently as a year ago, it was the fast-food chains that still seemed to be scrambling, trying to keep up with the bougier “fast-casual” boom (the decade’s “most important food trend”). Led by the likes of Chipotle and Shake Shack, these chains leveraged healthier options, superior ingredients, and quasi-cosmopolitan flair to woo consumers who would pay a little bit more to feel a little less guilty. In part, fast-casual was a corrective to decades of fast-food dominance — and an informal indicator of good economic times.
But now it’s Chipotle and Shake Shack that are scrambling, or rather, fast-tracking the least farm-to-table flex yet: the drive-thru. Shake Shack will open its first drive-thru in 2021 along with at least eight new walk-up windows, and Chipotle, which opened its 100th drive-thru in July, plans on opening another 80 to 100 “Chipotlanes” a year from now. Starbucks, struggling with the disappearance of crucial office-worker customers, is also pivoting to drive-thrus as its more fast-foody rival Dunkin’, after an early-pandemic dip in sales, has seen its market value soar.
Other fast-casual chains are borrowing fast-food ideas, too — like soup, salad, and sandwich chain Panera’s recent introduction of pizza, the king of delivery menu items, or Pret A Manger, which has amped up its food delivery operations and is trying to lure customers with unlimited coffee subscriptions.
By now it’s clear that the fast-foodization of the restaurant industry is more than just a fleeting pandemic response. In fact, it can be taken as an informal economic indicator of its own — a wager on hard times remaining hard, even after the virus becomes more manageable. While the Commerce Department’s latest GDP number will be spun as signaling a V-shaped recovery, unemployment numbers remain bleak, spending has slowed, and consumer confidence is slipping.
No offense to the Golden Arches, but that bright future for McDonald’s, it turns out, isn’t particularly great news for the rest of us.
