Yum Brands says it is exploring strategic options for Pizza Hut, a review that could include a potential sale as the iconic pizza chain struggles to regain momentum in an increasingly competitive market.
Papa John’s, which had been in talks with Apollo Global for a potential $2.1 billion take-private deal, now faces uncertainty after the private equity firm reportedly withdrew its offer as consumers tighten spending and the quick-service restaurant industry shows growing signs of fatigue.
Denny’s — the 72-year-old diner chain — announced on Monday that it had agreed to be acquired by TriArtisan Capital Advisors, owner of P.F. Chang’s, and Yadav Enterprises, one of Denny’s largest franchisees, in a $322 million deal.
Last month, Chipotle Mexican Grill cut its annual sales forecast for the third time this year, warning that consumer spending on dining out is likely to remain under pressure through early 2026.
Wendy’s, meanwhile, is expected to report a 5.6% drop in sales when it announces earnings on Friday, with profits projected to fall from 25 cents to 20 cents per share.
A wave of bankruptcies swept through the restaurant sector last year, with Red Lobster, TGI Friday’s, Buca di Beppo, and Rubio’s Coastal Grill all seeking bankruptcy protection as they struggled to compete with fast-casual brands and delivery platforms better aligned with modern dining habits.
Between January and March, Americans consumed one billion fewer restaurant meals than during the same period last year, according to market research firm Circana — a stark reflection of how economic headwinds are reshaping the nation’s dining habits.
Inflation, rising costs pinch restaurant owners and patrons alike
Inflation, rising labour costs, and the enduring shift toward takeout and home cooking have eroded profitability across the sector.
“A whole lot of these companies are finding their sales aren’t turning out to be as strong as expected,” says Jim Sanderson, a restaurant industry analyst for Northcoast Research, in a Time magazine article.
Labour costs, he added, are eating into margins that were already thin.
Restaurants that once spent 30 to 35% of sales on labour now spend 40 to 45%, said Dave Foss of Maverick Theory in the article.
Chief Executive of Chipotle Scott Boatwright told analysts last week that even higher-income diners were showing signs of restraint.
“We’re losing them to grocery and food at home,” Boatwright said on a Wednesday conference call.
“They feel the pinch, and we feel the pullback from them.”
How the pandemic brought about a shift in Americans’ eating habits
The pandemic accelerated a long-term shift toward delivery and takeout.
“Since 2020, there’s been a fundamental shift in restaurant patrons’ preference for takeout and delivery over in-store dining,” said Dinesh Puranam, an assistant professor of marketing at the University of Southern California, in a Guardian article.
“The pandemic triggered that shift quite rapidly, but the shift seems to be here to stay.”
Victor Fernandez of Black Box Intelligence, which monitors performance across US restaurant chains, said that although customers were initially eager to return to dine-in experiences after the pandemic, the steadily rising cost of eating out has begun to weigh on both restaurants and consumers.
“Over the past decade, restaurant prices have climbed 48%, while grocery prices are up just 28% — and that gap is becoming increasingly evident,” Fernandez noted.
McDonald’s and Chili’s lead the recovery efforts, and Domino’s shows resilience
While many chains struggle, a few giants are showing resilience.
McDonald’s is expected to report third-quarter earnings of $3.33 per share on $7.08 billion in sales, reflecting both year-over-year growth and strong pricing initiatives.
The fast-food leader has recently pivoted to affordability, cutting prices on eight popular combo meals by about 15% and rolling out a $5 Meal Deal and Buy One Get One for $1 promotion.
McDonald’s has also expanded late-night hours and added new beverages such as flavoured sodas and coffee-based drinks to appeal to younger customers.
Analysts say these efforts could help it regain market share lost to fast-casual rivals.
Chili’s, too, has notched a comeback.
Parent company Brinker International reported that same-store sales rose 21.4% in the first fiscal quarter of 2026, driven by a 13.1% increase in traffic.
The chain’s transformation, under CEO Kevin Hochman, has centred on operational streamlining and kitchen upgrades.
Menu improvements have paid off.
Chili’s upgraded ribs boosted sales by 35%, while Frozen Patrón Margaritas doubled their prior sales volumes despite higher prices.
The company’s focus on operational execution and menu simplification has driven profitability and customer satisfaction.
On the other hand, Restaurant Brands International, parent of Burger King and Tim Hortons, posted a 7% rise in quarterly revenue to $2.45 billion, beating expectations.
Strong international performance and a recovery at Tim Hortons helped offset weakness in North America.
Further, Domino’s Pizza also posted strong results, driven by promotions and menu innovation.
Its “Best Deal Ever” campaign and the launch of new items like the Parmesan-stuffed crust pizza helped lift orders and margins.
CEO Russell Weiner credited the company’s “operational precision” and ability to manage complex promotions as key to its turnaround.
Bright spots amid an uneven recovery
Despite the challenges, some indicators point to resilience.
Sales at US bars and restaurants rose 6.5% in the 12 months ended August, up from 4.3% a year earlier.
Chad Moutray, chief economist at the National Restaurant Association, noted that consumers remain “surprisingly resilient despite all the headwinds.”
“The good news is I don’t see a recession,” Moutray said. “Consumers are hanging in there.”
Economists also highlight a rebound in consumer confidence fueled by rising incomes and record stock market highs.
“The stock market’s recent strength has been a significant driver,” said Michael Pearce, deputy chief US economist at Oxford Economics.
Meanwhile, online reservation platform OpenTable reported that bookings for the week ending October 14 were up 12% from a year earlier, with higher-end restaurants leading the gains.
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