Business

McDonald’s and Cava’s earnings share one thing in common: The K-shaped economy has a vice grip on the lunchtime crowd

Published

3 months ago

November 5, 2025

McDonald’s may be known for its golden arches, and Cava for its four-letter name boldly stamped on each take-out bag, but both restaurant chains have a different letter to sum up business right now: a big K.

The respective fast-food CEOs are the latest in the restaurant business to sound the alarm of a K-shaped economy, where high-income earners are spending as if nothing is wrong, while lower-income Americans tighten their belts and pull back on spending.

“We continue to see a bifurcated consumer base with [quick-service restaurant] traffic from lower-income consumers declining nearly double digits in the third quarter, a trend that’s persisted for nearly two years,” McDonald’s CEO Chris Kempczinski said during the company’s earnings call on Wednesday, echoing a warning about a two-tiered economy he brought up in September. “In contrast, QSR traffic growth among higher-income consumers remains strong, increasing nearly double digits in the quarter.”

McDonald’s earnings missed estimates, but it saw rising sales, including a 2.5% increase in U.S. comparable sales for the quarter, in part because of the sustained popularity of the $2.99 chicken Snack Wrap meant to appeal to budget-minded customers.

Cava, a fast-casual chain that has historically attracted white-collar workers and suburbanites, is having similar issues attracting lower-income diners. The Mediterranean-inspired restaurant cut back its full-year sales growth guidance, reporting flat foot traffic and a 1.9% increase in comparable sales—short of expectations for 2.7%. CEO and co-founder Brett Schulman said younger customers are a particular challenge to reach because of the financial challenges they are facing.

“We don’t want to overstate the challenges of the consumer, but you can look at the data,” Schulman told investors on Tuesday. “They’re clearly out there, whether it’s student loan repayment, consumer sentiment, just the inflationary pressures all around them, whether it’s health care cost, housing costs—Gen Z unemployment [is] twice the national average.

“When we look at the data, it’s more that the younger cohort, that 25-to-35…they don’t have the steam that they had last year in the way that they were visiting or their frequency of visiting,” he added.

Schulman told Bloomberg the increase in comparable sales was due to some consumers adding sides or ordering more premium proteins like steak, suggesting wealthier consumers are propping up Cava as others pull back.

Industry trends

McDonald’s and Cava’s observations about consumers’ struggles aren’t happening in isolation. Last week, Chipotle CEO Scott Boatwright and Shake Shake CEO Rob Lynch noting that particularly young customers are cutting back due to financial pressures.

“This group is facing several headwinds, including unemployment, increased student loan repayment, and slower real wage growth,” Boatwright told investors at the company’s earnings last month. “We’re not losing them to the competition. We’re losing them to grocery and food at home.”

Pull-back behaviors are pronounced in young people—including many saddled with student loans—who experienced the steepest annual drop in credit of any generation since 2020, according to a recent FICO report. The unemployment rate for 16- to 24-year-olds—confronted with threats of AI and a stagnating job market—is nearly three times that of millennials and Gen Xers, according to data from the Federal Reserve Bank of St. Louis.

Young people have, as a result, sacrificed dining out. About 40% of Gen Z and millennial renters have reported eating out less to afford to pay the bills, according to an August Redfin survey of 4,000 U.S. homeowners and renters. One in five young people reported skipping meals entirely to save money.

While these restaurant chains have made similar observations about a two-tiered consumer base, their strategies on how to address consumer headwinds diverge significantly. McDonald’s, as a fast-food chain, has continued to lean into affordability with its Snack Wraps and the return of its Extra Value Meals in September, the first of such promotions since the pandemic.

Cava, however, has reiterated it is not a fast-food restaurant. Schulman said the company will continue to rely on its better-for-you branding of fresh ingredients and more premium proteins that some diners may have to pay a couple extra dollars for.

“We’re not going to get into that heavy discounting to combat any cyclical headwinds. That’s why we talked about doubling down on exceptional operations and great guest experiences,” Schulman told investors. “We want to make sure we’re doing everything we had in that spirit to deliver for our guests in this time when they’re feeling pressures all around you.”

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Business

Davos 2026: reading the signals, not the headlines

Published

24 minutes ago

January 21, 2026

Jace Porter

Davos 2026: reading the signals, not the headlines | Fortune

Louisa Loran advises boards and leadership teams on transformation and long-term value creation and currently serves on the boards of Copenhagen Business School and CataCap Private Equity. At Google, Louisa launched a billion-dollar supply chain solutions business, doubled growth in a global industry vertical, and led strategic business transformation for the company’s largest customers in EMEA—working at the forefront of AI, data, and platform innovation. At Maersk, she co-authored the strategy that redefined the brand globally and doubled its share price, helping pivot the company from traditional shipping to integrated logistics. Her career began in the luxury and FMCG space with Moët Hennessy and Diageo, where she built iconic brands and led innovation at the intersection of heritage and digital transformation.

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Business

Hotels allege predatory pricing, forced exclusivity in Trip.com antitrust probe

Published

55 minutes ago

January 21, 2026

Jace Porter

China’s hotels are welcoming record numbers of travelers, yet room rates are sinking—a paradox many operators blame on Trip.com Group Ltd.

For Gary Huang, running a five-room homestay in the scenic Huzhou hills near Shanghai was supposed to secure his family’s financial future. Instead, he and other hoteliers in China’s southeastern Zhejiang province say nightly rates have fallen to levels last seen more than a decade ago, as Trip.com’s frequent discount campaigns force them to cut prices simply to remain visible on China’s dominant booking platform.

“The promotion campaigns now are almost a daily routine,” said Huang, who asked to use his self-given English name out of concern of speaking out against Trip.com. “We have to constantly cut prices at least 15% to attract travelers. We have no choice but to go along with the price cuts.”

Trip.com has been central to China’s post-pandemic travel rebound, connecting millions of travelers with small operators like Huang. But for many hotels, visibility—and sometimes survival—comes at the expense of profits.

That dynamic is now at the heart of Beijing’s antitrust probe. Regulators allege Trip.com is abusing its market position, with analysts citing deflation across the sector as the government’s main concern. Interviews with lodging operators, industry groups and travel consultants describe a system where constant price-cutting and opaque policies are eroding profitability, even as demand rebounds.

Trip.com has said it’s cooperating with the government’s investigation. The company’s stock dove more 16% since the probe was announced a week ago.

Revenue per room—a key hotel metric—was flat across China in 2025, even as other Asian markets saw gains, according to Bloomberg Intelligence. Marriott International Inc.’s revenue per room in China fell 1% most of last year, while Hilton’s China room revenue trailed its regional peers.

The company controls about 56% of China’s online travel market, according to China Trading Desk, and has grown into the world’s largest booking site. Its dominance has helped fuel domestic tourism’s recovery—nearly 5 billion trips were logged in the first three quarters of 2025—but operators say the benefits are being offset by falling room yields.

“The market has developed unevenly and innovation is lacking due to monopolistic practices,” said He Shuangquan, head of the Yunnan Provincial Tourism Homestay Industry Association that represents some 7,000 operators. “The entire online travel agency sector is stagnating in a pool of dead water.”

‘Pick-one-of-two’

The broader challenge is oversupply and cautious consumer spending. In regions like Yunnan, hotel capacity has tripled since the pandemic, just as travelers tightened budgets. Consultants note that while people are traveling more, they’re spending less—leaving hotels slashing rates to fill empty beds and posting billions in losses.

For operators like Huang, the paradox is stark: the platform that delivers customers is also accelerating the race to the bottom. The complaints center around Trip.com’s “er xuan yi,” Mandarin for pick-one-of-two exclusivity arrangements—a practice that Chinese regulators have repeatedly vowed to stamp out.

Trip.com categorizes merchants into tiers with “Special Merchants” enjoying the most visibility and traffic, Yunnan Provincial Tourism’s He said. However, these top-tier merchants are typically prohibited from listing on rival platforms like Alibaba’s Fliggy, ByteDance’s Douyin or Meituan. Merchants who aren’t bound by these exclusive arrangements report being effectively compelled to offer the lowest prices on Trip.com’s online booking platform Ctrip, or risk facing a raft of measures like lowered search rankings.

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Business

CEOs at Davos are buying into the agentic AI hype

Published

1 hour ago

January 21, 2026

Jace Porter

Good morning. The atmosphere here at the World Economic Forum in Davos is all about nervous excitement as the Trump administration descends on the normally quaint but currently chaotic ski town in the Alps.

President Donald Trump will be making remarks just a couple hours from now, and Fortune will be reporting live from USA House on the main promenade, with insights from government officials and chief executives during and immediately following the president’s conversation. Keep an eye on our livestream, here https://fortune.com/2026/01/21/ceos-davos-buy-into-the-agentic-ai-hype/.

Elsewhere around town, CEOs are setting their agendas for the year. Here’s what’s top of mind for a few of them:

This will actually be the year of agentic AI. The first time I heard the term “agentic AI” was at Davos last year. For all the hype around it, does the average CEO really know what it is or how to deploy it? And is AI good enough yet for agents to replace or even significantly assist human employees? The answer appears to be yes. Google Gemini head Demis Hassabis told me that Gemini 3 achieved some milestones that allow agentic AI to truly proliferate in terms of its capabilities. ServiceNow CEO Bill McDermott is also an emphatic “yes,” and says he is already using it to do things like automate his IT department (without doing layoffs, he stresses; he says he has repurposed employees instead). He thinks other CEOs are ready to do the same.

Get ready for Google glasses—for real, this time. A decade ago, Google launched its Google Glass eyewear to widespread mockery. Hassabis thinks the timing was just off; at the time there was no super app to go on the platform. AI has changed that, and Hassabis is bullish on Gemini glasses being the future form for consumer AI. Meta is betting the same thing, and OpenAI is also reportedly considering a super-device, but it doesn’t seem like either can match Gemini’s capabilities any time soon.

There’s artificial intelligence, and now there’s also “energy intelligence.” Schneider Electric CEO Olivier Blum says that nailing energy intelligence is his mission this year. By that he means he wants to capture data from various energy sources into a single “data cube,” filter it, and use agentic AI so customers can manage it all in one place to find opportunities to save power and money. “Our job is to make sure we go to the next level of energy technology to make energy more intelligent,” he told me yesterday. If he can achieve it, he sees a 7%-10% annual growth opportunity ahead.

Greenland: national panic or national security risk? I’ve heard various reactions to President Trump’s desire for a full U.S. takeover of the huge island—from outrage to vigorous support. If he does get his wish (which some here think is likely), could Europe retaliate by making life harder and more restrictive for big U.S. tech companies? That was one CEO’s consideration. Said another: “Clear-eyed people can agree that that is a national security concern. And having a national security concern is not just a U.S. concern, it’s also a NATO concern.” They were optimistic that the in-person meetings this week would help move the matter in a positive direction. You can follow all our Davos coverage—including Fortune live interviews today with Ray Dalio, Dara Khosrowshahi and more—right here.—Alyson Shontell

Contact CEO Daily via Diane Brady at diane.brady@fortune.com

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