MW How fast food became America's hot new status symbol
By Venessa Wong
In this economy, being high-income isn't what it used to be
Kiersten Saunders noticed recently that most of the fast-food restaurants in her section of Atlanta had been renovated over the last five years. They "really leveled up," she said.
Saunders also noticed that some people were conspicuously consuming fast food. Her friend's son, who plays basketball, regularly asks his mother to send $20 via ApplePay $(AAPL)$ so that he can order food and have it delivered to his school. "It's not like there's not a cafeteria there; it's not like you can't bring a lunch box," she said. But there's something about being a teenager and not just ordering a meal, but also paying to have it DoorDashed $(DASH)$, that has become "a status symbol in the school system," she said.
If you need to feed a family, "factor in DoorDash or UberEats - now you're paying $60 for McDonald's $(MCD)$," Saunders told MarketWatch.
With fast-food prices up 31% compared with before the pandemic, a burger, fries and a drink have become uncomfortably pricey for many customers who aren't wealthy. The once humble combo value meal is, increasingly, a habit of well-heeled diners who are also looking for ways to spend less as prices rise. In this economy, being high-income isn't what it used to be.
"We're seeing a shift in who's consuming it because of the shift in who can afford it," Emily Rodgers, a senior marketing manager at the market-research company Drive Research, told MarketWatch.
Inflation is leading wealthier households to eat fast food instead of pricier options, while lower-income consumers eat out less, Rodgers said. In a 2023 survey by the company, 78% of respondents earning $150,000 or more reported eating fast food daily or a few times a week, compared with 43% of those earning $50,000 to $99,000.
"In some ways, fast food has always been a luxury, because it has always been expensive compared to cooking at home," said Margot Finn, a lecturer in American culture at the University of Michigan and author of the book "Discriminating Taste: How Class Anxiety Created the American Food Revolution."
"In times when people are more economically stressed, that gets exaggerated," Finn said.
'The idea of fast food being a luxury'
Earlier this year, Meta $(META)$ Chief Executive Mark Zuckerberg - the fourth-richest person in the world at the time of publication - gloated about Japanese McDonald's on Instagram with a photo of a tray filled with a teriyaki burger, McNuggets, and corn with edamame. "10/10. Give these guys a Michelin star," he wrote, lending the Golden Arches the subtle cachet of a billionaire's endorsement, and not just for offering value. Amazon $(AMZN)$ founder Jeff Bezos in 2022 shared a photo of himself at McDonald's with the caption, "My first job. And still the same great burger." Billionaire entrepreneur Mark Cuban once described his "ultimate meal" as a dressed-up McDonald's salad.
The fact that something that was once considered an affordable convenience is now largely seen as a luxury is 'part of why so many people have such a negative view of the economy right now.'Matt Schulz, chief credit analyst at LendingTree
In a survey conducted by LendingTree (TREE) in April, 78% of respondents said they now see fast food as "a luxury" because it has gotten so expensive. Separately, half of respondents, especially people earning less than $50,000 and those who have children, said they consider fast food a luxury because they are struggling financially.
Respondents rated Chick-fil-A - where a chicken sandwich costs about $5.25, depending on the location - the most "high-end" chain, followed by Starbucks $(SBUX)$, Chipotle $(CMG)$ and McDonald's.
"The idea of fast food being a luxury just seems like such a massive change," said Matt Schulz, chief credit analyst at LendingTree and an author of the report. "So many Americans have relied on fast food in either difficult times or super busy times." The fact that something that was once considered an affordable convenience is now largely seen as a luxury is "part of why so many people have such a negative view of the economy right now," Schulz added.
As more consumers take on grocery debt due to rising prices for basic necessities, data show fast-food chains - which have long been the territory of America's middle class - have attracted a significant base of higher-income customers too. At Chick-fil-A, 35% of customers last year had household incomes of at least $125,000, according to figures from Numerator. At Starbucks, the share was 33%; at Chipotle, it was 34%; and at McDonald's, it was 27%. Numerator declined to provide this data for previous years, citing changes in its methodology and complexities in trying to compare data year to year. MarketWatch reached out to these companies for comment.
By 2023, only households earning more than $200,000 were eating at restaurants more often than in 2019, according to market researcher Circana. Meanwhile, middle-income consumers - whose median household income is almost $75,000, according to the Census Bureau - have been cutting back on nonessential spending due to high costs.
"It isn't worth the price," said Sharon Wu, who started cooking at home for her and her partner rather than buying fast food due to recent price hikes. "With fast food being up there and more people not being able to afford it, it makes me wonder how long [the restaurants] will survive before having to pivot or target a new demographic."
It's not only high prices that have changed the veneer of fast-food restaurants. Higher-income customers are dining in these outlets as well. Households earning $150,000 or more prefer dining in at fast-food restaurants (29%) to the drive-through (16%), according to Drive Research. Those in households earning $50,000 to $99,999 preferred the drive-through (49%) to dining in (26%).
Yet the most preferred method of buying fast food for high-income diners - as Saunders suspected - is via delivery app (39%), which comes with additional fees and tips. "If I'm a higher-income individual, [the added cost] doesn't matter to me as much," said Drive's Rodgers.
Elevating fast food
Many fast-food chains have been investing in modernizing their restaurants over the last decade in response to the rise of fast-casual competitors. McDonald's got rid of many PlayPlaces (the chain's children's play area) and installed giant tablets for people to place orders. Wendy's $(WEN)$ added fireplaces; some even added fresh flowers to their tables. Starbucks opened higher-end "Reserve" cafes. None of those efforts were cheap - a McDonald's remodel cost anywhere from $160,000 to $750,000, the company said in 2019.
In 2018, McDonald's then CEO, Steve Easterbrook, told investors, "As you invest in quality and the properness of our food, [as] you invest in the physical real estate, as you invest in technology, what you tend to do is broaden your customer base." That was all before COVID-19-era inflation hit.
For some, the so-called elevation of fast food was an unwelcome change. By this year, customers outraged by rising prices started posting their receipts on social media - notably, an $18 tab for a Big Mac meal and a $24 bill for a burger, fries, drink and $2.19 tip at Five Guys, which both went viral. Executives at McDonald's, Starbucks, KFC and Pizza Hut owner Yum Brands $(YUM)$, and Wendy's have said they were seeing less business from lower-income customers under financial pressure.
Saunders and her husband, Julien, had been taking their child to Chick-fil-A since he was about 4 years old, but "everything has gotten crazy expensive," she said. Their child has aged out of kids' meals, and a regular meal at the chain costs a minimum of $9 in Atlanta. The family cut back their Chick-fil-A outings to once a week, on what they've dubbed "Chick-fil-A Thursdays."
Still, while fast-food establishments may be a luxury item increasingly out of reach for lower-income consumers with their higher prices and nicer interiors, they still have "a status handicap" because of how ubiquitous they still are, said Finn, the author and lecturer. "I don't think it actually matters how good [the food] is," being mass-market "works really powerfully against status," she told MarketWatch.
Fast food's bougie era may not last long. Chains are now trying to get more customers through their doors again by lowering prices. McDonald's and Burger King $(QSR)$ are now offering $5 combo meals. Wendy's has a $3 breakfast, months after walking back plans to experiment with surge pricing, which was largely seen as a way to raise prices. Starbucks' CEO said the company will be touting summer deals through its app to draw back consumers.
Julien Saunders, who previously worked as a chef and co-authored the book "Cashing Out" with Kiersten, said that while he understands the negative impact price increases have had on working-class families, "I do think to some extent it's necessary." Low fast-food prices depend on low wages and lower quality ingredients, he said - and although it was affordable, "we probably never should have ever experienced the dollar burger."
How have higher food prices affected you and your financial decisions? MarketWatch would like to hear from readers about their experiences. You can write to us at readerstories@marketwatch.com. A reporter may be in touch to learn more.
From the archives (February 2024): Yes, that Big Mac meal may cost $18 - but there's one good reason for it
-Venessa Wong
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May 29, 2024 14:31 ET (18:31 GMT)
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