Several US restaurant chains, including Wingstop and Domino’s, reported weaker-than-expected sales growth in the latest quarter, saying that soaring petrol prices caused by the US-Israeli war on Iran have forced their customers to cut back on other spending.
Many do not expect consumers to feel relief any time soon. Analysts expect other restaurant chains, including Shake Shack and Jack in the Box, also will show declining sales growth in upcoming earnings, according to LSEG averages.
The US-Israeli war on Iran, which began in February, has brought the worst-ever disruption to global oil supplies, driving up average US petrol prices to US$4.43 (S$5.66), a nearly 40 per cent increase since this time in 2025, according to GasBuddy.com.
Petrol prices have broken US$6 in California, which regularly ranks as the largest state for restaurants.
Wingstop, a chicken-wing chain that pitches itself on affordability, said higher pump prices contributed to an 8.7 per cent plunge in quarterly same-store sales. While chief executive Michael Skipworth said it was “extremely difficult for anyone to predict this macro environment”, he told investors on April 29 to expect shrinking sales over the year in part because of expectations that pump prices will remain high.
Even chains that did well in the latest quarter are staying cautious. Chipotle, which posted better-than-expected same-store sales growth of 0.5 per cent, maintained an outlook of flat growth over the year, which chief financial officer Adam Rymer attributed in part to uncertainty over the war and petrol prices.
Wall Street forecasts reflect the darker mood. In April, nearly twice as many restaurant analysts cut profit forecasts for next quarter as raised them, according to LSEG data.
Flagging investor confidence in the sector is also evident in the 5 per cent drop in the LSEG US restaurant index since the start of the war, erasing more than US$40 billion in market value, according to LSEG data.
The US$4 mark at the pump is a tipping point, according to Mr Sebastien Fernandez, chief analyst at US-based restaurant consulting firm Revenue Management Solutions.
Shortly after the war began, the firm analysed 14.6 billion restaurant transactions over the last four years and found that as pump prices rise, restaurant visits gradually tick down – until the US$4 mark, at which point the impact doubles.
The firm estimated that US$4.20 average petrol prices mean about 1.5 per cent fewer visits, and if pump prices reach US$5.10 or more, fast-food restaurants could see a 3 per cent drop in traffic.
The firm estimated that for a restaurant drive-through with 300 daily transactions, a US$1 spike in petrol prices loses the restaurant about six customers a day, piling up to US$22,000 in lost annual sales.
Even before the latest spike in fuel costs, customers had been cutting back on restaurant spending, prompting costly discounts to win customers back. On April 29, Yum Brands’ Taco Bell, which launched a value meal starting at US$3 in January, reported 8 per cent quarterly same-store sales growth in its US restaurants.
“We’re seeing a record level of value menus right now,” said Mr Mark Wasilefsky, head of restaurant finance at TD Bank.
Domino’s CEO Russell Weiner told investors on April 28 that his chain’s competitors ran promotions “out of our playbook”, partly contributing to the chain’s weaker-than-expected 0.9 per cent US same-store sales growth. Although Mr Weiner said his chain was better positioned to sustain these discounts, the company still cut sales forecasts for the year.
Starbucks, which reported 7.1 per cent quarterly same-store sales growth in North America on April 28, may have actually benefited from the gloomy consumer outlook. CEO Brian Niccol told investors the company had gained among lower-income consumers who saw the chain’s beverages as “a little bit of indulgence”.
Demand for affordable indulgences, such as sweet beverages instead of vacations, has fuelled growth at some restaurant chains.
The next major indicator will come from McDonald’s, which reports results on May 7 and last quarter posted stronger-than-expected sales amid a drive to push value meals. REUTERS
