Greg Frankfort is the lead restaurant analyst over at Guggenheim Securities. He's with us now for more color on that conversation. Greg, Kate's report talked a little bit and focused more so on that kind of lower income consumer feeling the pain.Is that going to reverberate through not just McDonald's but other parts of fast food as well. Yeah, it's it's it's clearly been the issue and I I think Chipotle's probably laid it out the clearest that that kind of sub45,000 uh uh 45,000 household income customer h ...

Core Insights - The lower-income consumer segment has been under pressure for the past 18 to 24 months, impacting fast food chains like Chipotle, where 30% of its business comes from households earning between $45,000 and $100,000 [2][4] - Despite challenges, certain fast food chains like Taco Bell, McDonald's, and Domino's have shown positive comparable sales growth, indicating resilience in the sector [4][5] - Casual dining has outperformed fast casual dining, contrary to expectations in a softer restaurant environment, particularly benefiting higher-income consumers [6] Company-Specific Insights - Starbucks faces potential labor shortages during the holiday season, but the current labor market is the loosest it has been in 10 years, which may ease hiring challenges [8][9] - Texas Roadhouse is highlighted as a top investment pick, trading at approximately $160, with strong revenue growth and a favorable earnings multiple of less than 18 times, despite concerns about inflationary pressures on beef [10][11]

Core Viewpoint - McDonald's Corp. is experiencing a decline in U.S. consumer spending, particularly among lower-income customers, due to rising costs of necessities, which has led to a decrease in restaurant traffic from this demographic [1][2][5]. Group 1: Consumer Spending Trends - CEO Chris Kempczinski indicated that restaurant traffic from low-income diners has been declining at a nearly double-digit rate for almost two years [2][3]. - The decline in spending highlights the impact of inflation and high living costs on households with limited disposable income, forcing them to cut back on even affordable fast-food options [4][5]. Group 2: Company Strategies - To counteract the slowdown in consumer spending, McDonald's has implemented menu promotions and value offerings, such as the return of Snack Wraps and Extra Value Meals, aimed at attracting budget-conscious diners [4][5]. - The company believes that value is important across all income levels, not just for low-income consumers, as everyone seeks good value for their money [5]. Group 3: Economic Outlook - McDonald's anticipates that the challenging consumer environment and financial pressures on consumers will persist well into 2026, citing high costs of housing, childcare, and food as significant factors [5][6]. - The company is balancing the need for affordability with profitability as it navigates the broader consumer weakness and spending power divide across the U.S. [6].

Core Points - Unionized Starbucks baristas have voted to authorize an open-ended strike if a contract is not finalized by November 13, coinciding with the company's Red Cup Day [1] - The union, representing over 9,000 workers, has filed more than 1,000 charges against Starbucks for alleged unfair labor practices [2] - Both Starbucks and the union are prepared to return to discussions, with the union demanding improved staffing, better pay, and on-the-job protections [3] Group 1 - The union's strike authorization could impact operations in over 25 cities during the high-traffic holiday season [1] - Starbucks Workers United has been in negotiations with the company since last year, indicating ongoing tensions and unresolved issues [2] - The union's spokesperson emphasized that the responsibility lies with Starbucks to resolve the situation, suggesting potential business disruptions if negotiations fail [2] Group 2 - Starbucks claims to offer the best jobs in retail, but union representatives argue that improvements are necessary for all employees, not just leadership [3] - The union's demands include a fair contract and resolution of unfair labor practice charges, which they believe are crucial for the company's turnaround [3] - The ongoing conflict highlights a significant divide between employee expectations and company management's perspective on job quality [3]

Core Points - Starbucks Workers United has authorized an open-ended strike if a contract is not finalized by November 13, coinciding with the company's Red Cup Day, potentially affecting operations in over 25 cities [1] - The union represents more than 9,000 workers out of Starbucks' total workforce of over 200,000 baristas and has filed over 1,000 charges against the company for alleged unfair labor practices [3] - The union has been in negotiations with Starbucks since last year, demanding improved staffing, better pay, and on-the-job protections, while both sides blame each other for the breakdown in talks [4] Company Statements - Starbucks claims that any agreement must reflect the reality that it already offers the best job in retail [5]

Core Insights - McDonald's reported a 2.4% increase in US same-store sales for the third quarter, surpassing estimates of 1.9%, attributed to a larger average check despite the ongoing "value wars" in the fast-food industry [1][3] - The company experienced a net income of $2.28 billion, or $3.18 per share, which is an increase from $2.26 billion year-over-year, although earnings per share fell short of estimates at $3.22 [4][5] - Revenue rose 3% to $7.08 billion, slightly missing estimates of $7.1 billion, with expectations of continued economic concerns affecting customer spending into 2026 [7] Sales Performance - Same-store sales globally increased by 3.6%, reversing a decline of 1.5% from the previous year, with international markets showing strong growth [1][10] - In international operated markets, same-store sales rose 4.3%, while the international developmental licensed markets segment saw a 4.7% increase, driven by growth in Japan [10] Consumer Trends - The company noted a bifurcated consumer base, with traffic from lower-income consumers declining nearly double digits, while higher-income consumer traffic grew nearly double digits [4][10] - McDonald's is focusing on value meals to attract cash-strapped consumers, reintroducing items like Snack Wraps at a low price of $2.99, which became popular quickly [8][11] Future Outlook - The company is optimistic about future sales growth due to the return of Extra Value Meals and promotional deals, although it may face easier comparisons due to last year's E. coli outbreak impacting sales [11]

Unionized baristas at Starbucks in the U.S. are preparing to go on strike next week and disrupt one of the coffee chain's busiest days, Bloomberg News reported on Wednesday. ...

Financial Data and Key Metrics Changes - Consolidated total revenues increased by 10.8% to $216.2 million in Q3 2025 compared to $195 million in the prior year, primarily driven by an increase in company restaurant sales, offset by a decrease in franchise revenues [17] - Adjusted EBITDA decreased to $49 million from $61.9 million in Q3 2024 [17] - Adjusted diluted EPS for Q3 2025 was $0.73, down from $1.44 in Q3 2024 [18] - Year-to-date adjusted free cash flow was $68.2 million, compared to $77.8 million in the same period last year [18] - G&A expenses increased to $50.2 million in Q3 2025 from $45.4 million in the same period last year [17] Business Line Data and Key Metrics Changes - Applebee's reported a 3.1% increase in comparable sales, while IHOP posted a negative 1.5% in comparable sales [6][22] - Applebee's average weekly franchise sales in 2025 were $52,600, with off-premise sales contributing approximately $12,000 or 22.9% of total sales [22] - IHOP's average weekly franchise sales were $36,700, with off-premise sales contributing $7,750 or 20.4% of total sales [22] - Applebee's commodity costs increased by 0.3%, while IHOP's commodity costs increased by 5.7% compared to the prior year [23] Market Data and Key Metrics Changes - IHOP outperformed Black Box Traffic metrics every month in 2025, marking Q3 as the third consecutive quarter of traffic outperformance versus industry benchmarks [11] - The value mix at IHOP remained at about 19%, while Applebee's value mix slightly increased to about 30% in Q3 [5][50] Company Strategy and Development Direction - The company is focusing on a dual-brand strategy, combining IHOP and Applebee's to drive higher sales and create operational efficiencies [25][26] - The dual-brand concept has shown promising results, with international locations delivering 1.5X sales compared to single-branded restaurants [26] - The company plans to double its total international dual-brand restaurants by the end of the year [15] Management's Comments on Operating Environment and Future Outlook - Management noted slightly higher macroeconomic anxiety leading to more intentional spending decisions among consumers [5] - The company is optimistic about the growth opportunities across key international markets despite macroeconomic headwinds [15] - Management expects to maintain full-year financial guidance, anticipating to be on the low end of the EBITDA range due to investments in company restaurants [24] Other Important Information - The company repurchased $22.5 million in stock and paid $7.8 million in dividends in Q3 2025 [21] - The board declared a reduction of the dividend from $0.51 per share to $0.19 per share to fund a larger share repurchase program [32] Q&A Session Summary Question: What is the expected impact of company-owned stores on future performance? - Management indicated that disruptions from remodels and closures would not be present next year, expecting a $9-$10 million segment profit hit from company restaurants this year [35] Question: How is IHOP addressing check growth amidst a focus on value? - Management shared a three-prong approach to drive transactions, including upselling strategies and featuring premium-priced items [38] Question: Can you elaborate on franchisee demand for dual-branded concepts? - Initial demand is characterized by conversions rather than new builds, with more interest from IHOP franchisees due to existing dinner challenges [41] Question: What is the current consumer demographic trend? - Management noted a slight shift towards higher-income guests, while lower-income guests and Gen Z are dining out less [47] Question: What is the expected number of dual-brand openings by year-end? - The company expects approximately 30 dual-branded restaurants to be open or under construction by year-end, with a total of 50 expected in 2026 [51]

Core Insights - McDonald's reported US same-store sales growth of 2.5%, exceeding Wall Street's expectation of 2.2% and matching the previous quarter's growth rate [1][2] - Global same-store sales increased by 3.6%, consistent with estimates, following a 3.8% rise in the previous quarter [2] - Adjusted earnings per share were $3.22, below the expected $3.32, with revenue at $7.1 billion, aligning with estimates [2] Sales Performance - Systemwide sales, including both company-operated and franchised locations, grew by 6% [3] - The return of the Snack Wrap and a deal with US franchisees to lower combo meal costs were key strategies to enhance value offerings [3] - The digital return of the Monopoly game significantly boosted app downloads and digital sales growth [3] Consumer Insights - The CEO noted a "bifurcated consumer base," with traffic among lower-income consumers declining nearly double digits, while higher-income consumers showed nearly double-digit growth [4] - The CFO projected an acceleration in US same-store sales growth for the fourth quarter, influenced by last year's E. coli outbreak [5] - The CEO expressed concerns about ongoing pressures on lower-income consumers due to high rents and food prices [5]

Group 1: ADP Private-Sector Payroll Report - The ADP private-sector payroll report for October shows an increase of +42K new positions, exceeding expectations by +20K and marking a positive shift from a revised -29K the previous month [2][3] - Despite the positive report, the American labor market is in decline, averaging only +29K new jobs over the last four months compared to +53K and +197K in the previous two four-month periods [3] - Job growth was driven by large firms (over 500 employees) which added +73K jobs, while small and medium-sized companies experienced negative growth [4] Group 2: Industry Breakdown - The Trade/Transportation/Utilities sector led job growth with an increase of +47K, followed by Education/Healthcare at +26K, while Leisure/Hospitality and Professional/Business Services saw declines of -6K and -15K respectively [5] - Wage gains for job stayers averaged +4.5%, while job changers saw an increase of +6.7%, indicating a narrowing gap in wage growth between the two groups [6] Group 3: Q3 Earnings Results - McDonald's reported earnings of $3.22 per share, missing estimates of $3.35, but same-store sales rose +3.6%, leading to a +3% increase in pre-market trading [7] - Humana posted earnings of $3.24 per share, beating expectations by +11.34%, but lowered guidance resulted in a -5.5% drop in shares [8] - Aurora Cannabis achieved a significant earnings surprise with $0.09 per share compared to the anticipated $0.03, and revenues reached a record $70.5 million, up +15% year over year, resulting in a +9% increase in pre-market shares [9]