Elevated fuel costs are pressuring both restaurant consumers and operators

The U.S.-Iran conflict that began in late February has created a chokehold on oil exports, driving up fuel costs significantly. Americans are now paying approximately 30% more at the pump compared to last year — and the restaurant industry is feeling the impact.

There is plenty of data showing that such higher gas prices negatively impact restaurant sales and traffic, particularly at drive-thru concepts. Technomic found that nearly 90% of consumers are affected by rising gas prices and spend less on goods and services to manage the increases. It is estimated that every 50-cent increase in gas price has a $68 billion impact on consumer spending.

Sales impact

Perhaps it’s no surprise, then, that gas prices were cited as a sales drag for some companies during second quarter earnings reports — the first full quarter since the Iran conflict began.

John Peyton, CEO of Applebee’s and IHOP parent company Dine Brands, said elevated gas prices and lower consumer sentiment contributed to more deliberate spending behavior at his brands.

“Guests aren’t walking away from dining out, but they are making intentional choices of when and where they choose to go,” he said.

Applebee’s and IHOP overindex on lower-income consumers, who are especially pressured amid the current environment. Wingstop does as well, and CEO Michael Skipworth said elevated gas prices have had a “pronounced impact” on his chain’s core guests.

Both companies have responded by doubling down on their value offerings. Applebee’s 2 for $25 Menu and IHOP’s Everyday Value menu, for instance, have driven higher checks and more consistent messaging, Peyton said.

Meanwhile, Wingstop is testing more value offerings, including single-user entry price points and price-per-person group occasions, such as the recent “30 wings for $30 promotion,” which drove transactions in the second quarter. Sharpening the brand’s position on value is critical, Skipworth said, to protect its core consumers experiencing “incremental pressure” from high gas prices.

Chili’s conveys value across its menu, including its wildly successful 3 for Me platform starting at $10.99. As consumers tighten up their spending, the casual-dining chain has also protected its alcohol mix with the launch of the Margarita of the Month Club earlier this year. The club features a different Margarita each month for $6.

“We know it drives drink attachment, even if the broader macro trends are against alcohol attachment and what’s going on with gas prices,” Kevin Hochman, CEO of parent company Brinker International, said last month.

McDonald’s is taking more of a direct approach in offering relief to its pressured consumers. The chain has teamed up with Shell for a joint promotion that provides its loyalty members discounts at gas stations. MyMcDonald’s Rewards members can redeem 1,500 points for 50 cents off per gallon — up to 20 gallons — at participating Shell stations through Sept. 12.

Operational cost squeeze

While restaurants get creative with consumer-facing value strategies, they're simultaneously managing internal pressures from higher fuel costs. Broadline distributors have added surcharges that further compress margins, for instance.

As such, Wingstop adjusted its same-store sales outlook downward to reflect “the current macroenvironment, including recent inflation in fuel prices,” according to CFO Alex Kaeida.

Shake Shack CEO Rob Lynch said his company’s revised full-year outlook reflects “developments that emerged during Q2, including higher fuel and distribution costs” (along with record high beef prices).

Chipotle and Cava have also issued conservative outlooks as the war in Iran and rising gas prices create continued uncertainty. Cava reported strong topline sales during the second quarter, but restaurant-level profit margin declined 60 basis points to 25.7%. CFO Tricia Tolivar expects costs to continue rising throughout the remainder of the year and has issued a margin outlook of 23.7% to 24.3% for fiscal 2026 due in part to fuel surcharges. She warned of such pressures in the first quarter.

“The energy cost impact … hits a couple of different line items,” she said. “We’re contemplating an additional 20 to 40 basis points of an impact that would likely be more significant in the third and fourth quarter as fuel surcharges will kick in. We're starting to see early signs of that. If (inflation) persists, (the impact will) continue to escalate into the remainder of the year.”

Though specific utility rates and fuel types vary, energy costs in the U.S. are up by nearly 5% overall versus last year.

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