While third quarter earnings for major fast food chains rolled in with winners and losers glaringly visible, an overall theme persisted – the pervasive impact of consumer value perception. Among the notable victors were McDonald’s, Chipotle, Texas Roadhouse, and Wingstop, all marking US traffic growth in the latest quarter. Conversely, Noodles & Company and Restaurant Brands International reported declining traffic, a sure hit to their bottom line.

In the midst of current economic conditions, inflation looms large, and even though economists predict a ‘soft landing’ as opposed to a full-fledged recession, consumers are increasingly vigilant about value. This change in consumer behavior was evident in the performance of Chipotle whose low-income customers seemingly visited less frequently due to mounting inflation. Albeit the company’s pause on price hikes, Chipotle has indicated that a potential price adjustment might transpire in the fourth quarter.

Meanwhile, in the race for market dominance, fast food industry stalwarts McDonald’s and Wendy’s drew distinct demarcations in their consumer segments. McDonald’s CEO Chris Kempczinski propagated that the golden arches chain saw a robust performance among consumers earning less than $100,000 annually. Contrarily, Wendy’s CEO Todd Penegor disclosed that consumers making less than $75,000 were showing restraint.

One manifestation of the value perception is the industry-wide trend of stepping down from fast-casual to fast-food restaurants, resulting in a boon for the latter. However, this doesn’t mean that all promotions were created equal or were equally effective.

Case in point, McDonald’s successful ‘Grimace Birthday Meal.’ The promotion leaned heavily on nostalgia featuring the Grimace milkshake and core menu items, thereby driving traffic and stirring social media frenzy. An opposing narrative was presented by Papa John’s limited-edition Cool Ranch-flavored Papadias. Despite initial buzz, these couldn’t compete with the previous year’s pepperoni-stuffed crust pizza, illustrating that new and exciting doesn’t always equate to lucrative.

Another eye-opener was delivered by Noodles & Company. They reported a double-digit drop in traffic after wrestling with customers’ resistance against a notable 13% price uptick from the previous year. The company responded by lowering prices by 3%, in an attempt to win back consumer favor.

CEOs and Wall Street analysts are imploring fast food chains not to ignore the significance of consumer traffic. The consensus is that, with eateries delaying price hikes and customers tightening their purse strings, restaurants need to double down on driving increased foot traffic.

Inflation aside, recent reports reveal an overarching pattern of dipping restaurant foot traffic. With many refraining from additional price hikes that boosted last year’s revenue, customers are becoming choosier with their spending. This marks a decisive fork in the road for the performance of many popular chains. However, as Chain like Wingstop illuminate, the perception of value can positively impact consumer behaviour, echoing the sentiments of Chipotle’s CFO Jack Hartung on the return of low-income customers.

Moving into the second half of the year, the challenge remains for the fast-food industry to strike a balance between value perception, competitive pricing, and traffic to maintain top-line growth. A heightened focus on consumer habits, menu pricing promotion, and innovation will play key roles in this endeavour. As such, the fast-food landscape remains a rigorous teeter-totter seeking equilibrium in these turbulent times. The pressure, it seems, is on for Q3.