Illustration: Sarah Mafféïs for Bloomberg Businessweek
The fast-food outrage began with a burger and fries. Last summer, Financial Times journalist Sam Learner tweeted a photo of menu prices at a Connecticut McDonald’s, showing $17.59 for a Big Mac combo meal. “This was at a rest stop, but these McDonald’s prices are nuts right???”
It turned out the rest stop did have a particularly inflated price—the McDonald’s around the corner from the Bloomberg office today sells the same meal at about two-thirds that price—but still, that’s almost $12. And Mickey D’s isn’t alone. The average check size at fast-food chains has gone up 47% since 2019, according to Mark Kalinowski, chief executive officer of restaurant investing advisory firm Kalinowski Equity Research. He attributes the increase to both bigger orders and, of course, inflation.
This puts fast food in the same financial orbit as fast casual, the healthier, bougier and typically more expensive fare popular among the office worker crowd. Today you can get a greasy Big Mac meal or, for just a few dollars more, Sweetgreen’s new caramelized garlic steak atop a kale Caesar salad, a meal with far fewer calories, substantially more vegetables and well-sourced protein. In our current upside-down world of bank-breaking lunchtime options, fast casual has somehow become the better-bang-for-your-buck choice.
Let’s be clear: Ideally, we’d all assemble our own kale salads for much less money at home, but the American need for convenience is one trend that never changes, something fast casuals have mastered. “When I started the restaurant, fast food was value menus and 99-cent menus and Taco Bell had 59-, 79- and 99-cent items on their menu,” recalls Chipotle founder Steve Ells, granddaddy of the category. “People were telling me, ‘But Steve, you’re doing it all wrong, no one’s going to pay the prices you’re asking.’” The cost they were complaining about in 1993? A fresh, made-to-order chicken burrito for $3.95.
Boy, were those people wrong. Soon Chipotle went from a small burrito chain to one backed by McDonald’s, then a full-scale, publicly traded national phenomenon, constantly adding restaurants to serve up Niman Ranch pork and freshly chopped tomatoes, or whatever combination the customer wanted that day, for about $5.50 a pop. Shake Shack and Sweetgreen also got into the mix, as did the Sweetfin poke bowls in Southern California, Souvla’s Greek sandwiches farther north, Tacodeli in Texas and Just Salad in the Northeast, Florida and Illinois.
But when the pandemic hit and offices closed, the future of the sad desk salad (or burrito) suddenly hung in the balance. Then, in a very unexpected plot twist, the lunch salads and its bowled brethren not only survived, they followed their customers to the suburbs and thrived. From January 2020 to February 2024, the number of fast-casual restaurant locations has jumped 10%—more than double the increase for fast food, which went up 4.4%, according to market researcher Datassential.
And not insignificantly, prices jumped, too. Chipotle (no longer run by Ells, who just opened the first location of his robot-powered fast-casual chain called Kernel) has raised prices six times since 2021, the Wall Street Journalreported last month. Kalinowski says bills at these spots are also up about 34% since 2019. Somehow, those $12 lunchtime bowls have become $14, and they often clock in at $15 to $17 when you add tax, and even more if you add a beverage or a tip. Surely, it seemed, we’ve reached peak fast casual.
But instead of lunch-goers rejecting the Digs and Sweetgreens, they’re still flocking there, and at least some former fast-food regulars are trading up. Thanks to the incessant fast-food price hikes, the premium for a fast-casual lunch versus fast food was only $2.64 in the first quarter of 2024, according to market researcher Circana. And so fast casual suddenly finds itself in a new sweet spot, playing out just as market researcher Mintel predicted it would in a report released last June. “Comparable prices,” Mintel said, “will drive traffic to fast casuals, where diners can get higher quality food, larger portions, and more value for their dollar.”
Meanwhile, prices at sit-down restaurants continue to surge, as Matthew Schneier, chief restaurant critic at New York magazine, recently observed. “Something happened to the casually uncasual restaurant, slowly and then all at once,” he wrote. “It’s now difficult, if not impossible, to make it out for less than $100 per person.” He, of course, is talking about New York City, not exactly a hotbed of affordable dining. But the larger phenomenon is happening everywhere. Which means, as taking out a family of four to a weeknight dinner becomes the equivalent of what was once a Saturday-night splurge, fast casual stands to benefit on the high end, too.
This is not lost on smart chains, like Sweetgreen and Cava, the Mediterranean bowl destination that went public to great fanfare last June. The Sweetgreen steak addition was partly a dinner play, CEO Jonathan Neman said in a recent earnings call. For Cava, so was the suburban focus, which it’s had from the get-go, CEO Brett Schulman told my colleague Daniela Sirtori recently, emphasizing that the company wanted to be places where it can serve not only a $12 lunch but “dinner seven days a week,” too.
Investors—who, let’s be honest, are also the target customers—are paying attention. Cava’s share price is up
about 90% since the beginning of the year. Sweetgreen, which isn’t even profitable, has soared about 200% over the same period.
Chipotle, whose stock price is up about 40% for the year, can now much more easily steal customers from its former investor, McDonald’s. The burger chain’s revenue might still be more than double Chipotle’s, but its shares are down about 10% this year, and it’s finally fighting back: As Bloomberg recently reported, the company is planning to offer a $5 value meal.
That’s a nice Band-Aid, one aimed not at the Sweetgreen converts but at those customers who can’t afford to eat out at all anymore. Still, the fast-food giant—which, we shouldn’t forget, has only grown alongside consumer shifts to healthier food— should watch its back. Another fast-casual upstart with sights set on national growth, Salad and Go, is now offering salads (also with a steak option) for $7.99 or less. —With Daniela Sirtori