Fast-food Restaurants Are Hit Hardest As Customers Cut Back

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The consumer environment has proven more difficult than expected this year, executives from giant distributor Sysco said this week, as inflation and rising menu prices lead customers to cut back on dining out.

Quick-service restaurants have been hit hardest, he said. "You can see it across our portfolio of customers that we serve, from QSR to higher-end-QSR, that's been hit the hardest," Hourican said.

He believes that is rooted in the struggles of lower-income consumers, which make up a substantial number of customers at fast-food restaurants.

"The lower-income customer, it's struggling more than the higher-income customer," Hourican said. "There is some softening, we believe, tied to menu prices."

Sysco is the country's biggest broadline distributor. Its broad array of customers throughout the restaurant industry can provide some higher-level insight into the state of the business.

Hourican's comments include reports from numerous restaurant chains while also reflecting some of the dichotomy that exists between concepts based on the state of their consumers.

While fast-casual chains such as Cava, Wingstop and Chipotle Mexican Grill have enjoyed strong sales so far this year, fast-food brands like McDonald's, Jack in the Box, KFC and Papa Johns have watched customer traffic decline.

"We in the industry are all seeing this kind of pressure," Jack in the Box CEO Darin Harris told investors earlier this month. "We definitely felt it coming into the second quarter."

Consumer confidence has taken a substantial hit this year, according to the Conference Board. The group's measure of consumers' views on the state of the economy fell for the third straight month in April . Their short-term outlook for the economy plunged to a level well below what the organization considers a sign of an upcoming recession.