DBRS Morningstar says quick-service restaurants will have an easier time weathering the coming economic storm than full-service restaurants, as rising costs and slowing consumer spending weigh on the already embattled industry. A man waits for a take-out order in a fast food restaurant in Toronto on Saturday, May 9, 2020. THE CANADIAN PRESS/Chris Young
TORONTO – DBRS Morningstar says quick-service restaurants will have an easier time weathering the coming economic storm than full-service restaurants, as rising costs and slowing consumer spending weigh on the already embattled industry.
New commentary by the credit rating agency says restaurants around the globe are still dealing with a pandemic hangover and are now being met with decreasing consumer spending as inflation and interest rates weigh on customers’ budgets, as well as increased costs to their businesses.
DBRS Morningstar says restaurant traffic in some countries took more than two years after the pandemic hit to return to 2019 levels, and that as traffic was resuming, inflation and interest rates accelerated.
The company says these economic challenges mean people will dine out less often and spend less when they do, and this is already showing up in traffic data from the U.S. and Canada.
The agency says while restaurants will benefit from more people returning to the office in 2023, this will be offset by consumers curbing spending and going out less.
It says the pressures on businesses will likely result in less demand for franchise growth as well as less spending on things like acquisitions and capital expenditures within the food service industry.
This report by The Canadian Press was first published Jan. 31, 2023.
