America's K-shaped economy has turned restaurant winners and losers upside down

• Fast food's recession playbook is breaking as deals fail to lure pressured consumers.
• Casual dining is winning the K-shaped economy while fast food leans harder on discounts.
• Analysts told Business Insider that the discount strategy is a double-edged sword.

For the past few decades, fast food consumption has had a reliable recession indicator: when budgets tighten, Americans head for the drive-thru.

However, in today's K-shaped economy, analysts say that the old playbook is breaking — and some of the biggest chains are finding that even price cuts aren't bringing customers back.

"We have a consumer that's cutting back on dining, and that's been happening for really, probably two and a half to three years," Restaurant Business editor in chief Jonathan Maze told Business Insider. "So we now see a large number of chains that are using a discount strategy as a crucial form of marketing."

Deals are becoming the business

The deals aren't just louder — they're becoming structural. In the past year, 29% of all foodservice traffic was driven by a deal, the highest rate recorded in 50 years, according to Circana's recent report on foodservice trends.

At the same time, menu prices have surged. Average menu prices increased 31% between February 2020 and April 2025, according to the National Restaurant Association's analysis of Bureau of Labor Statistics data, putting pressure on consumers who rely on fast food as an everyday option.

That combination helps explain why the K-shaped spending split has looked "atypical" in restaurant earnings, as Bank of America analyst Sara Senatore told Business Insider in an email: "Restaurants have been reporting softer demand among low-income households for the past two years. At the same time, spending by high-income households has continued to grow. That's part of why casual diners have outperformed QSRs."

Traditionally, quick-service restaurants (QSRs) like McDonald's and Chick-fil-A would expect to gain share when households feel squeezed. Analysts say the last few years have been different because the lower-income consumer — a core traffic driver for many QSR brands — has been under sustained pressure from everyday costs.

Maze rattled off the list: rent, insurance, student loans, energy costs, and grocery prices are all up. With restaurant prices up 30% to 35% since 2018, he said, "the low-income consumer really notices that."

Why value isn't enough

The result, Maze said, is that chains have leaned on value as "the only real tool" to bring that customer back — but there's a risk.

"If you spend so much of your effort to push price discounts on your consumer, they get used to those discounts, and they don't come back and pay full price when things get better," he said, pointing to Subway as a cautionary tale: "Subway still can't recover from its $5 foot-long deal, 14 years after they got rid of it."

McDonald's has become the clearest bellwether for the tension between pricing, perception, and traffic. In a May 2024 company fact sheet responding to viral claims about menu inflation, McDonald's said food-away-from-home inflation rose 29% between 2019 and 2024, with core items climbing in the low-20% range. The company has also leaned into promotions, including the $5 Meal Deal introduced in June 2024.

Several analysts told Business Insider the bigger question is whether deals are actually making an impact for consumers — and whether chains can afford them.

"It's challenging for franchisee profitability," TD Cowen analyst Andrew Charles said, describing what he called an "incredibly value-focused" quick-service environment.

He argued that the chains standing out weren't necessarily discounting the most.

"What's really worked within quick service hasn't been value, as much," Charles said. "Value is important, but you look at when McDonald's, Burger King, etc, have done well — it's really when they have great menu innovation or great marketing that they really see customers respond."

In other words, value matters — but it isn't enough.

Casual dining's surprise comeback

That helps explain why casual dining has emerged as an unexpected winner in the K-shaped moment. Instead of racing to the lowest price point, chains like Texas Roadhouse and Applebee's have emphasized "abundant value" through bundles, set meals, and legacy promotions.

"Casual diners are also featuring value, but by highlighting value already on the menu," Senatore wrote, pointing to Olive Garden's Never Ending Pasta Bowl and Chili's "3-for-me."

Chili's has been one of the clearest examples. In Brinker International's fiscal Q2 2026 earnings call, the company said Chili's same-store sales rose 8.6%, with traffic contributing 2.7%. Media coverage has framed the brand as winning cost-conscious customers with consistent execution and value positioning.

The widening gap between segments is now a key signal analysts are watching — and the middle may be the next battleground.

For now, analysts largely agree on what's coming next: more deals, more limited-time offers, and more marketing stunts aimed at consumers who are either trading down or still spending, but who are far more selective.

"We have more marketing, I think, than we've ever had," Maze said. "It's actually fascinating to see what the industry is doing today to try to get customers."