Weight-loss drugs are suppressing appetites for millions of Americans, threatening to upend dining habits at fast-food chains and casting a shadow over the restaurant industry’s long-term growth.
The stark warning came from Redburn Atlantic, which on Tuesday issued a rare double downgrade on McDonald’s Corp. MCD — cutting the stock from Buy to Sell — amid growing concern that appetite-suppressing medications such as Novo Nordisk A/S’s NVO Wegovy and Eli Lilly and Co.’s LLY Zepbound are reshaping consumer behaviors.
Redburn’s analyst Chris Luyckx said the behavioral effects of GLP-1 drugs are deeper than previously believed and could cause a cascading demand shock for restaurants reliant on habitual and group dining.
Luyckx estimates McDonald’s could lose 28 million annual visits, amounting to $481.5 million in revenue — a 0.9% drag on its systemwide sales.
While that may appear manageable today, the analyst warned that the risk is cumulative, with broader shifts in eating habits already underway.
“A 1% drag today could easily build to 10% or more over time, particularly for brands skewed towards lower-income consumers or group occasions,” Luyckx said.
“Despite best-in-class scale and global reach, McDonald’s is showing cracks. Traffic is soft, especially in the U.S., where pricing fatigue and value perception are growing concerns,” he added.
Since 1977, the portion of calories Americans consume from restaurants has nearly tripled. But Redburn’s report suggests that trend may be reversing.
Currently, just 6% of U.S. adults are using GLP-1 medications, and 12% have ever taken them. Redburn’s healthcare team expects penetration to reach 12% of non-type 2 diabetic obese adults by 2030.
“Lower-income users cut fast-food spending by 14%, double that of higher-income users, with the sharpest declines at lunch and dinner,” Redburn’s report said.
Among lower-income GLP-1 users, lunch spending drops by approximately 9%, while dinner falls by about 12%.
These meals are typically the highest-volume periods for limited-service restaurants, leaving brands skewed toward those times disproportionately exposed.
Domino’s Pizza Inc. DPZ and KFC face the highest relative risks. Domino’s could see a $129.8 million revenue hit per year, or 1.4% of its system sales, while KFC may lose 1.2%.
Redburn initiated coverage on Domino’s Pizza with Sell rating and a 12-month price target of $340, implying 25% decline from current levels.
“Domino’s, McDonald’s and Pizza Hut face higher vulnerability given their high U.S. exposure, lower-income skews, daypart exposure and greater reliance on group occasions, where behavioural spillovers are more likely to occur,” said Luyckx.
Chains with more diversified traffic patterns, like Taco Bell and Chipotle Mexican Grill Inc. CMG, are better positioned.
Taco Bell benefits from late-night traffic, where GLP-1 effects are minimal, while Chipotle’s more affluent and health-conscious customer base shields it from the brunt of the shift. Chipotle’s projected annual loss is $86.6 million, or just 0.8% of sales.
Read Now:
