McDonald’s and Chili’s Gain Ground as U.S. Diners Trade Down

McDonald’s and Chilli’s Gain Ground as U.S. Diners Trade Down — Fast-Casual Chains Lose Younger Customers

New York, November 7, 2025 – As American consumers feel the squeeze of persistent inflation and weak wage growth, value-oriented restaurant chains such as McDonald’s (MCD.N), Chilli’s (EAT.N), and Domino’s (DPZ.N) are emerging as clear winners.
Younger diners, hit hardest by rising costs and resumed student loan payments, are increasingly shifting away from pricier fast-casual brands like Chipotle (CMG.N), Cava (CAVA.N), and Sweetgreen (SG.N).

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Value Trumps Premium Dining

Restaurant visits across all segments — from fast food to casual dining — declined in the third quarter of 2025, but budget-focused chains have proven more resilient, according to Revenue Management Solutions.

“Sticky inflation and elevated menu prices are forcing low- and mid-income households to rethink eating out,” the report said.

Chilli’s, the flagship brand of Brinker International, has managed to reverse customer losses through aggressive value marketing.

“Our ‘better than fast food’ positioning is resonating with households earning under $60,000,” said CEO Kevin Hochman.

Promotions like Triple Dipper appetisers and the $10.99 burger meal have attracted price-conscious consumers, backed by visible TV and social media advertising.

Similarly, Burger King, owned by Restaurant Brands International (QSR.TO), saw stronger traffic thanks to its “2 for $5” and “3 for $7” combo deals.

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Chipotle and Cava Struggle with “Value Perception”

The shift has been toughest for fast-casual players, which position themselves between fast food and full-service dining.

Chipotle CEO Scott Boatwright admitted that the segment is “out of favor” and that customers increasingly perceive the brand as too expensive.

“We are working to reframe Chipotle’s value proposition,” Boatwright said, after internal surveys showed that diners no longer view its menu as affordable.

Meanwhile, Cava and Sweetgreen — known for their premium ingredients and trendy branding — are struggling to maintain traffic among younger demographics.

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Labor and Cost Pressures Create a Divide

Analysts say that the widening gap between fast-casual and quick-service operators is largely due to labor costs and pricing power.

“Labor costs are vastly different between the two categories,” said Brian Mulberry of Zacks Investment Management. “When fast-casual chains raise prices to protect margins, it pushes low-income diners back toward drive-thru value options.”

Rising beef prices, compounded by new tariffs, are adding further pressure. Executives at McDonald’s, Chipotle, and Restaurant Brands all highlighted the surge in beef costs as a key risk for 2026 profitability.

Still, McDonald’s scale advantage allows it to maintain margins. The company’s price-to-earnings ratio of 22.9 remains well above the industry median of 14.4, underscoring investor confidence in its consistent value strategy.

By contrast, Cava’s P/E ratio stands at 81.4, reflecting both high growth expectations and concerns about profitability.

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Domino’s Finds Sustainable Growth

Domino’s Pizza continues to leverage its large store network and efficient cost model.

“Our scale lets us sustain value that’s profitable — unlike others who are spending through their balance sheet just to keep up,” CEO Russell Weiner told Reuters.

The pizza chain’s approach to maintaining low prices without sacrificing profitability has earned it strong consumer loyalty and market share gains in delivery dining.

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Outlook: A Two-Tier Restaurant Market

The U.S. restaurant landscape is clearly splitting in two:

• Fast, affordable brands like McDonald’s, Chili’s, and Domino’s are winning by catering to financially cautious households.
• Fast-casual chains are struggling to prove that “premium quality” is worth the extra cost.

As inflation persists and real wages stagnate, the trend toward “trading down” looks set to define 2026 — forcing restaurant groups to decide whether to compete on price or differentiate on value.

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Sources: Reuters (Savyata Mishra & Waylon Cunningham, Nov 7, 2025)