McDonald’s and Chipotle have had a great few years, with the two chains dominating large swathes of the QSR (quick-service restaurant) and fast-casual dining categories, respectively. And both brands have been reporting strong sales while unveiling expansion plans in a period when many other restaurant categories have struggled.
What is driving this success? We dive into the data to find out.
The Ingredients
McDonald's and Chipotle have both focused on innovation and menu enhancements in recent years, positioning themselves well to address industry challenges. And despite the drop in consumer confidence in August and September, the two chains continued outperforming the wider dining category. And while year-over-year (YoY) foot traffic trends indicate that neither chain is immune from the ongoing economic headwinds – both Chipotle and McDonald’s are well-positioned to continue their winning streak.
Chipotle visits were elevated all months analyzed, with September visits up 4.7% YoY. Still, 4.7% YoY growth is significantly lower than the double-digit monthly visit increases seen earlier in the year, as consumers’ tightening budgets – as well as comparisons to a particularly strong Q3 2022 – may be limiting Chipotle’s growth potential. McDonald’s, meanwhile, experienced a slight decline in visits in August and September of 1.1% and 3.7% YoY – but, like Chipotle, continued outperforming the overall dining category. McDonald’s is famous for its One to Three Dollar Menu, while a meal at Chipotle will likely cost significantly more – and perhaps as a result, Chipotle visitors tend to come from higher-income areas than McDonald’s diners and may be less impacted by the price increases.
Captured and Potential Market HHIs
Analyzing the two chains’ trade areas using the STI: Popstats dataset reveals that McDonald’s and Chipotle do indeed attract visitors from different household income levels.
McDonald’s and Chipotle’s potential markets – the population in the areas where the chains’ visitors reside, weighted by population size – tend to have similar household income (HHI) levels ($70.1K and $71.1K, respectively). This means that Chipotle venues are not necessarily located in higher-income markets when compared to McDonald’s. But the household income in Chipotle’s captured markets – the population in the areas where the chains’ visitors reside, weighted by visit share – is significantly higher than the median HHI in its potential market. Meanwhile, McDonald’s captured market median HHI is lower than it is in its potential market.
This suggests that Chipotle attracts the higher-income households in its trade area, while McDonald’s attracts the lower-income ones. The relative affluence among Chipotle visitors could help explain its strong YoY visits, as its visitor base may be less affected by rising restaurant prices.
Demographic Ingredients for Success
But while the lower median HHI among McDonald’s visitor base may be restricting its growth in the short-term, a deeper dive into the QSR leader’s audience reveals factors that will likely help the chain maintain its long-term dominance – while driving even further growth for Chipotle.
Analyzing the psychographic segmentation in Chipotle and McDonald’s captured market trade area using the Spatial.ai: Personalive dataset highlights the chains’ different reach among critical audiences. Chipotle visitors were more likely to belong to suburban segments – including “Wealthy Suburban Families” and “Upper Suburban Diverse Families” – while McDonald’s diners were made up of more rural segments such as “Rural High Income” and “Rural Average Income.”
Rural consumers may be more likely to cut spending as prices increase, which could explain some of McDonald’s recent YoY visit dips. But given recent domestic migration trends, rural audiences are likely to become an increasingly important consumer segment – and McDonald’s appeal to this audience will help the brand to continue leading the QSR category. Meanwhile, Chipotle’s strength in suburbs is also likely to intensify as the company continues its expansion into small towns, positioning the brand for even more growth ahead.
Final Thoughts
McDonald’s and Chipotle continue to dominate the fast food dining segment. By leaning into their strengths – McDonald’s as a rural dining destination with an affordable menu, and Chipotle as a suburban destination popular among diners from higher income brackets – both companies appear well-positioned to continue dominating their respective dining categories.
For more data-driven dining insights, visit placer.ai/blog.
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