Newsletter · · Ashutosh Agarwal

Diners Are Trading Down to Chili's, Not McDonald's - QSR Value Wars - Week of September 14, 2026

QSR Value Wars for the week of September 14, 2026. Podcast synthesis on how McDonald's fumbled the trade-down economy while budget diners shifted sideways to Chili's and Texas Roadhouse, Dutch Bros and Chili's out-executed on growth, Steak 'n Shake bet on MAHA politics, Starbucks baristas called for a boycott, and beef got its first green shoot from reopening Mexican cattle ports.

QSR Value Wars

Week of September 14, 2026: Diners Are Trading Down to Chili's, Not McDonald's

Here's the fast-food riddle of the week. The economy is exactly the kind that's supposed to be great for McDonald's, money's tight, people are watching every dollar, and when that happens they're meant to flock to the cheapest burger in town. That's the whole story investors have believed about McDonald's for decades: when times get hard, it wins.

Except it isn't happening. This week the consumer data came in, and it says something genuinely strange: people who are trying to save money are walking past McDonald's and sitting down at Chili's and Texas Roadhouse instead. Not trading down to fast food, trading sideways, even up, to a sit-down restaurant with a waiter. Because after McDonald's raised its prices, a combo meal costs about the same as a full plate at Chili's. And once a customer does that math in the drive-thru line, McDonald's has already lost them.

So the story this week isn't about beef for once. It's about the value war itself, and who's actually winning it, and the answer is not who you'd think. Chili's just posted its twentieth straight quarter of growth. Dutch Bros grew sales 32%. Steak 'n Shake is betting its whole future on beef-tallow fries and MAGA hats. And McDonald's, the supposed safe haven, is down 26% from its high and promising it will never get out-priced on value again. Let's get into it.

TL;DR

  • McDonald's "fumbled" the one economy that was built for it, and the data now shows customers leaving for Chili's and Texas Roadhouse. Alt-data shop Likefolio says a McDonald's meal now costs about the same as those sit-down chains after its price hikes, and its $3 value menu only reached two-thirds of stores. Stock down ~26% from its high. (Schwab Network)
  • Chili's just notched its 20th consecutive quarter of same-store sales growth. Its CMO credits viral "culture pops", like a Scranton restaurant rebuilt to look exactly like the one in The Office, for pulling in a whole new younger crowd. This is where McDonald's traffic is going. (The Big Impression)
  • Dutch Bros grew revenue 32% and same-shop sales 5.8% last quarter, its 13th straight positive quarter, and raised guidance. CEO Christine Barone is going straight at Starbucks with Gen Z, customization, energy drinks, and a new warm-food menu that lifts a shop's sales ~4%. (Choppin' It Up by Bloomberg Intelligence)
  • Steak 'n Shake has hired a "Chief MAHA Officer" and is remaking its menu around beef tallow, grass-fed beef and cane-sugar Coke. Owner Sardar Biglari has personally borrowed against the chain's performance. Sales are up, but so are costs, "it is not on fire." (The Journal.)
  • Starbucks baristas are now calling for a customer boycott. A union delegate says ~700 stores have organized with zero signed contracts in five years; they want $15/hour raised to $17 and enough staff to actually run the floor. A new risk hanging over a stock that had just won its traffic back. (Mostly Economics)
  • The beef story finally has a green shoot, from Mexico, not Washington. Cattle are starting to cross the border again as ports reopen, and one procurement expert says "a bottom in beef supplies is likely very close." (Markets to Menus by ArrowStream)
  • Independent analysts put hard numbers on the President's beef-import plan: about 25–35 cents a pound, not the $1.50 advertised. The 300,000 tons of duty-free imports work out to roughly 2–2.6% of what America eats in a year. (The Trade Guys · The Business of Agriculture)
  • The lettuce outbreak that grabbed Taco Bell's name last week is officially over. The government declared the cyclospora outbreak, tied to Taylor Farms lettuce, ended, after 11,000+ people got sick, ~500 hospitalizations and two deaths. (Closing Bell)

What's New

McDonald's Is Losing the Value War to the Sit-Down Guys

For weeks this newsletter has argued the value war is really about who keeps the budget customer. This week we got a clean read on how McDonald's is doing, and it's not good.

On Schwab Network (September 11), Landon Swan, co-founder of Likefolio, a firm that tracks what millions of people say online to gauge real consumer demand, laid out the problem in plain terms. McDonald's, he said, "is supposed to be the trade down play, sort of a defensive name, but they really fumbled that. They missed it." Two mistakes did the damage: "significant price increases last quarter," and a $3 value menu that "was only rolled out to, I think, two-thirds of the stores." His verdict: "this K-shaped economy kind of handed them consumer demand and they kind of blew it."

(A "K-shaped economy," if it's a new phrase: the idea that higher earners keep spending fine while lower earners pull back hard, the two lines of the "K" splitting apart. That lower-income pullback is exactly the customer McDonald's is built to catch.)

Here's the line that should worry every McDonald's investor. Swan says his data is full of people asking, in effect: "why would I go to McDonald's when I can go to Texas Roadhouse or Chili's or O'Charlie's or someplace like that? And it's about the same amount of money, which is mind blowing." He caught himself on how wrong that is: "McDonald's should be the cheap option... and they really lost that." People "started doing the math," he said, "the next time they went to Texas Roadhouse, they're like, hold on, wait a minute, what are we paying here at McDonald's?"

The scoreboard backs him up. McDonald's stock is down about 26% from its all-time high. And it's not alone at the bottom, Swan's chart had Chipotle, Yum Brands, Wendy's and McDonald's all lower over the past year, with Wendy's having "blew it as well," while the relative winners were Restaurant Brands (the Burger King and Popeyes parent) and Starbucks.

It's not all doom. Likefolio's measure of McDonald's consumer demand is still up about 7% versus a year ago; it just "really tanked" over the course of 2026 from a strong start. Swan actually thinks the stock is oversold, "undervalued by maybe 30 or 40 points," with the ~$250 level as a likely floor, and he expects a recovery "over the next maybe two to three quarters" if management executes. The plan is public: push the $3 menu to 100% of stores, and lean on a new beverage platform where drinks carry "like 80, 90% margin" to protect profits while food prices come down. The CFO, he noted, "pledged that McDonald's will not get beaten on value in the future."

Why it matters: that pledge is the whole ballgame. McDonald's has admitted, out loud, that it lost on price, and Swan is right that acknowledging the mistake is better than being confused by it. But the damage is real and measurable now, and the customers didn't trade down to a cheaper burger. They traded sideways to a table. Winning them back means convincing people McDonald's is cheap again, and, as Swan says, "it's going to take a little bit of time."

Where Those Customers Went: Chili's, on a 20-Quarter Tear

If you want to see the other side of McDonald's lost traffic, look at Chili's. On The Big Impression (September 9), the chain's chief marketing officer, George, walked through a turnaround that has now stacked up "20 straight quarters of same-store sales growth", five full years. He was frank that plenty of people didn't believe it would last: "there were some people early on that thought this might be kind of a lucky... boom splat. And I think we've shown now... that this is sustainable."

Chili's is owned by Brinker International (ticker EAT), and its comeback is built on a marketing idea worth understanding because it's so cheap and so effective. George's team spends a slice of its budget on what he calls "culture pops", swings meant to "insert Chili's into a cultural conversation." The showpiece this year: Chili's opened a restaurant in Scranton, Pennsylvania, the setting of The Office, which famously used Chili's for its "Dundies" awards, and built it as a "time capsule back to 2005," down to the booth where Michael Scott sat and the long-discontinued Awesome Blossom on the menu. It became "one of our biggest restaurant openings ever," with huge lines and a flood of Reddit posts hunting for Easter eggs. More importantly, George says it's pulling in "an entirely new audience and a new generation," a crowd Chili's had lost, now reached through TikTok.

His north star is exactly the number McDonald's is bleeding: "the number one thing... are top line sales and traffic." Marketing, he says, "brings the guests in and then we kind of hand the baton over to operations."

Why it matters: this is the destination for the value-seeking customer McDonald's let slip. A full-service chain with a waiter is out-executing the drive-thru on both buzz and perceived value, and doing it consistently for five years. When a defensive fast-food name loses its price edge, the traffic doesn't vanish; it shows up on someone else's income statement.

Dutch Bros Is Running the Starbucks Playbook Better Than Starbucks

The other clear winner this week was Dutch Bros, the drive-thru coffee-and-energy chain (ticker BROS). On Choppin' It Up by Bloomberg Intelligence (September 8), CEO Christine Barone told Bloomberg restaurant analyst Mike Halen the company had "a wonderful 2Q": revenue up 32%, EBITDA (a rough proxy for operating profit) up 28%, and same-shop sales up 5.8%, "above our estimate." They raised full-year guidance too. It's now "eight consecutive positive transaction quarters" and "13 consecutive quarters of positive same shop sales."

One honest wrinkle: the stock actually sold off after that report because, as Halen put it, it "beat the sell side's 2Q estimates on the top and bottom line" but "missed the buy side's bogey", meaning the whisper number investors were quietly hoping for was even higher. That's the tax a fast-growing stock pays; expectations run ahead of a genuinely strong print.

What's striking is how directly Barone is coming for Starbucks. Dutch Bros, founded in Oregon in 1992, calls itself "the category creator of customized energy," with roughly 90% of its drinks served iced, perfectly aimed at a Gen Z customer who "wants it customized" and drinks "a lot of iced... more energy." Two newer moves stood out. A protein latte (they were "first to market" in early 2024). And "Mist," an energy drink with antioxidants and electrolytes that launched as a limited-time offer in the spring and did well enough to become permanent in August. Then there's food: a new warm-food program (they literally "added ovens into our shops") that delivers "about a 4% lift" in sales wherever it rolls out. The long-term growth plan is opening new shops at a "mid-teens percentage" rate every year.

Why it matters: this is the fast-casual growth story in miniature, take share by being differentiated and beloved rather than cheapest. Dutch Bros isn't fighting a value war at all; it's building an experience Gen Z chooses on purpose. It's the mirror image of the McDonald's problem, and a reminder that "win on value" isn't the only way to win.

Steak 'n Shake Bets the Company on Beef Tallow and Politics

For something completely different, The Journal., the Wall Street Journal's daily podcast, devoted its September 11 episode to the strangest turnaround in fast food: Steak 'n Shake, the burger chain controlled by investor Sardar Biglari, is remaking itself around the "MAHA" movement ("Make America Healthy Again," associated with Health Secretary Robert F. Kennedy Jr.).

The chain now has a "Chief MAHA Officer", Michael Bose, a former RFK Jr. staffer at Health and Human Services who once helped revise the federal food pyramid. His job, in his words: bring "fast food to what it was years ago... real ingredients, real food that everyone can trust and pronounce." In practice that means frying fries in beef tallow (rendered cow fat) since early 2025, rolling out grass-fed beef across all restaurants, selling cane-sugar Coke, and, coming in October, buns made without seed oils. There's a heavy political layer too: flags, "Patriot shakes," accepting Bitcoin, fry deals for Tesla drivers, and a public feud with Cracker Barrel (which Biglari also owns a stake in) that included selling "fire the Cracker Barrel CEO" hats. This week the company even endorsed a congressional candidate.

The reporting was refreshingly honest about the economics. The WSJ's take: "it is improving sales, but it's also increasing costs... it is not on fire... It is not shaking the whole fast food landscape." The supply chain is the hard part, switching "from really mass market food distributors... to smaller producers that can provide beef tallow" is "really expensive to do." And the stakes are personal: Biglari "has taken out a loan based on Steak 'n Shake's performance. So if this didn't work out, it would be really bad for his overall company." One sober line captures the whole sector's bind: "everything in food right now is getting more expensive... all fast food chains are struggling to keep their prices and price increases moderate. And when you're adding this whole new element to it, it makes it even more challenging."

Why it matters: it's a fascinating natural experiment in whether a values-and-ingredients story can move fast-food traffic. But note the cost side. Betting a burger chain on grass-fed beef and beef tallow, in the exact year beef is at record highs, is swimming straight into the cost squeeze we track every week. Sales lift is nice; if it comes with a fatter food bill and a leveraged owner, the margin math is fragile.

Starbucks Baristas Call for a Boycott

Amid all the winning, a real risk surfaced for Starbucks. On Mostly Economics (September 10), Vicente Martinez, an eight-year Starbucks barista in Texas and a bargaining delegate and strike captain for Starbucks Workers United, said the union now represents "about 700 stores nationwide" but has yet to sign a single contract, with talks at a standstill for roughly a year. "It feels like we make progress," Martinez said, but "the company is not moving forward."

Their asks are concrete and modest: lift starting barista pay from "15" to "17 an hour," and fix chronic understaffing, "most of the time we're understaffed to where we'll work the floor with maybe two to three people. When in reality, we need at least four." With no contract, the union is escalating to a consumer boycott. "Supporting this company is supporting... the mistreatment of workers," Martinez argued, asking customers to "take my side."

Why it matters: keep this in perspective, 700 stores is a small slice of Starbucks' U.S. footprint (the chain employs 340,000-plus people), and a barista boycott is a long way from a financial event. But Starbucks was one of this year's genuine traffic-recovery stories, and a public "don't buy Starbucks" campaign is precisely the kind of brand-and-labor overhang that can nick that momentum. It's also a live read on the sector's other cost squeeze, not beef, but labor.

Beef, Week Two: A Green Shoot Arrives From Mexico

After a month of unrelenting bad news on beef, this week brought the first genuine glimmer, and it didn't come from any executive order. On Markets to Menus by ArrowStream (September 10), a podcast run by a food-service procurement firm, the hosts flagged that Mexican cattle are starting to cross the U.S. border again as ports reopen. The Douglas, Arizona crossing is open, and a second major port in New Mexico is expected to open later this month; historically those two handle 63% of cattle imports. It's early, a single day's 2,500 head already equals about six-tenths of a week's national slaughter, and these animals still need months in feedlots before they become beef. But the hosts' read was the most optimistic thing said about supply all summer: "a bottom in beef supplies is likely very close," with real help arriving in the back half of 2027.

Meanwhile, the independent number-crunching on the President's import plan kept pouring cold water on the headline promises. On The Trade Guys (September 9), CSIS trade analysts Scott Miller and Bill Reich noted the U.S. herd is at "its lowest level... since 1951" and pegged the 300,000 tons of duty-free imports at just "2% or so of the total annual supply." Reich's price estimate: "25, 35 cents cheaper per pound and not the 150 that has been advertised." He even offered "some sympathy for the administration", "they did not cause the problem", while warning that its own immigration crackdown cuts the other way, since "a substantial portion" of meatpacking workers are immigrants, and losing them "added to the price increase problem."

On The Business of Agriculture (September 7), protein consultant Todd Thurman put the same imports at "about 2.6%" of annual production and called the plan's promise to sell the beef at a 25% discount "bizarre on so many levels," with no enforcement mechanism, even "a tacit admission that tariffs increase prices at the retail level." And on AG Bull (September 9), cattle analyst Mike Sands dismissed the administration's new "BRAND" herd-rebuild program because "the primary factors that have been limiting expansion... [are] drought and the lack of forage and pastures. And there's nothing in that program... going to mitigate that." His stat: roughly "55 to 60 percent of the hay acreage" and nearly 60% of cattle inventory sit in moderate-or-worse drought.

Why it matters: the reopening of the Mexican border is the first supply news that could actually bend the cost curve, but the timeline is 2027, not this quarter. For restaurant food costs right now, nothing has changed: beef is still historically expensive, the government's fixes are still cosmetic, and the only real relief is a slow herd rebuild that drought keeps delaying. The green shoot is real; it's just far away.

The Lettuce Outbreak That Named Taco Bell Is Officially Over

Last week the cyclospora outbreak, a parasite tied to lettuce from a Taylor Farms operation, finally got a marquee restaurant name attached (Taco Bell). This week it ended. On Closing Bell (September 10), the program reported that the federal government declared the outbreak over: lettuce sourced in central Mexico and sold by Taylor Farms "sickened more than 11,000 people, caused nearly 500 hospitalizations and two deaths."

The food-safety world isn't quite ready to move on. On Don't Eat Poop! (September 8), hosts Francine Shaw and Matt Regusci put the unofficial illness tally "over 30,000" (versus the government's confirmed ~11,000, since many cases go unreported), and counted 21 outbreaks so far in 2026, the problem being not the number of outbreaks but the "massive" number of people each one is sickening. They noted the scare had become internet folklore, with one person dressing up in "a Taylor Farms bag of iceberg lettuce" as "the scariest costume this Halloween." Their half-joke doubles as a real read-through: when produce scares hit, diners retreat to what feels safe, "a Big Mac with no onions... and no lettuce."

Why it matters: with the outbreak declared over, the acute brand risk to Taco Bell (Yum Brands' profit engine) starts to fade. But the episode is a reminder of how exposed produce-forward menus are, and, perversely, how a lettuce panic can nudge traffic back toward the burger and away from the salad.

The Debate: Is "Winning on Value" Even the Right Game?

Every week we frame the same core question: do the value wars rebuild real traffic and defend share, or just trade away margin for transactions while franchisees get squeezed? This week added a sharper, more uncomfortable version of it.

The case that value wars work: McDonald's own experience is the argument. It stopped competing hard on price, raised prices, half-delivered its $3 menu, and immediately hemorrhaged customers, with its stock down 26%. Its fix is to double down on value (the $3 menu to every store, a CFO pledge to never be out-priced again) while protecting margins with high-markup drinks. If that works over the next two to three quarters, it proves the playbook: commit fully to value, use beverages to defend the P&L, and the defensive customer comes back. Value discipline is the price of staying in the game.

The case that it's a trap, or beside the point: look at who's actually winning, and none of them are fighting a price war. Chili's is on a 20-quarter growth streak on the back of viral marketing and a better sit-down experience, not a cheaper burger. Dutch Bros is compounding 30%-plus revenue growth by being differentiated and beloved by Gen Z. Both are pulling traffic, some of it McDonald's own lost customers, without racing anyone to the bottom. In this telling, the value war is a margin-destroying distraction, and the real winners are the brands with genuine pricing power and a reason to be chosen. McDonald's problem wasn't that its value menu was too small; it's that it has nothing else to offer a customer who's willing to pay a bit more for a nicer meal.

The resolution, and the throughline of the whole newsletter: the trade-down is real, but it isn't landing where the old playbook says it should. The budget customer isn't automatically flowing to the cheapest drive-thru; they're flowing to whoever gives them the best perceived value, and this week that was a sit-down booth at Chili's and a customized iced energy drink at Dutch Bros, not a McDonald's combo that quietly crept up to the same price. McDonald's can win its customer back by making itself genuinely cheap again. But the deeper lesson of the week is that "cheap" is only one kind of value, and the operators thriving right now mostly sell a different kind.

The Names in Play

McDonald's (MCD), the week's cautionary tale. It fumbled the exact economy it was built for: price hikes plus a half-delivered $3 menu pushed value customers to Chili's and Texas Roadhouse, and the stock is down ~26% from its high. Bull case (per Likefolio's Landon Swan): it's oversold, "undervalued by maybe 30 or 40 points," demand is still +7% year-over-year, and management has both admitted the mistake and armed a fix, $3 menu everywhere, plus 80–90%-margin beverages to defend profits while cutting food prices. Bear case: the damage is measurable, the customer traded sideways rather than down, and winning them back "is going to take a little bit of time." Next catalyst: how fast the $3 menu hits 100% of stores and whether traffic stabilizes over the next two to three quarters. (Schwab Network)

Brinker / Chili's (EAT), the clearest beneficiary of McDonald's stumble. Twenty straight quarters of same-store sales growth, a marketing engine (the Office time-capsule restaurant) that keeps manufacturing viral moments and pulling in younger diners, and an operator's laser focus on traffic. When a fast-food combo costs the same as a Chili's plate, this is where the money goes. The watch-item is durability, but management makes a credible case this is a five-year trend, not a fluke. (The Big Impression)

Dutch Bros (BROS), the growth-and-differentiation winner. Revenue +32%, EBITDA +28%, same-shop sales +5.8%, guidance raised, 13 straight positive comp quarters. It's taking share from Starbucks with customization, Gen Z appeal, a hit "Mist" energy drink and a new warm-food program adding ~4% to shop sales, all on a mid-teens annual shop-growth plan. The bear flag: the stock sold off on the print because expectations are sky-high, so it can be a great business and a volatile stock at once. (Choppin' It Up by Bloomberg Intelligence)

Steak 'n Shake (private; Biglari Holdings, BH), the high-variance experiment. A menu and brand rebuilt around beef tallow, grass-fed beef, cane sugar and MAHA politics is lifting sales but also costs; it's "not on fire," and owner Sardar Biglari has personally borrowed against the results. Betting a burger chain on grass-fed beef in a record-beef-price year is the tell, the upside is a differentiated, culturally loud brand; the risk is a fragile margin and a leveraged owner. (The Journal.)

Starbucks (SBUX), a fresh overhang on a recovering name. Baristas at ~700 unionized stores, still without a contract after five years, are calling for a customer boycott and demanding $17/hour and real staffing. Financially minor for now, but a brand-and-labor risk worth watching on a stock whose whole 2026 story was winning traffic back, and it's a live gauge of the labor-cost squeeze. (Mostly Economics)

Read-Throughs

Casual dining is the real trade-down destination. The single most important read of the week is that "trade down" no longer means "go to fast food." Chili's and Texas Roadhouse, full-service, sit-down, are absorbing McDonald's price-sensitive customers because a fast-food combo now costs about the same (Schwab Network). For anyone modeling the sector, that scrambles the usual recession playbook: the defensive winners this cycle may sit in casual dining, not the drive-thru.

Protein and commodity suppliers: relief is coming, but it's a 2027 story. The reopening of Mexican cattle ports is the first real supply catalyst in months, and one procurement expert thinks beef supplies are near a bottom, but the beef itself doesn't hit the market until the back half of 2027 (Markets to Menus by ArrowStream). For 2026 franchisee food costs, nothing has improved. And note the supplier-side irony flagged on American Family Farmer (September 9): with beef up 12% since June, cheap imports may simply get blended with domestic beef while retail prices hold, the savings pocketed before they reach a burger patty.

Labor is the other cost war, on two fronts. The Starbucks boycott push (Mostly Economics) and the CSIS point that immigration enforcement is raising meatpacking wages (The Trade Guys) are two versions of the same story: labor costs are climbing at both the restaurant counter and the processing plant. Beef gets the headlines, but wage pressure is quietly squeezing store-level margins from both ends.

Delivery: still diversifying away from restaurants. This week's Uber material was largely a rerun of last week's theme, Uber Eats is now 1.5 million merchants across grocery, cosmetics and retail, with an advertising business over a $2 billion run rate growing 50% a year, bolstered by its $14.8 billion Delivery Hero deal (The Intrinsic Value Podcast, September 9). The read-through is unchanged: the platforms that tax every delivery order are getting less dependent on restaurants and more powerful as gatekeepers.

Restaurant tech: AI comes for procurement. The one fresh tech angle was food-buying, not the POS. Buyer's Edge Platform, which says it processes ~$110 billion of food-service purchasing and touches roughly one in three U.S. restaurants, is pushing AI tools to help operators cut sourcing costs (Markets to Menus by ArrowStream). In a year when every input is more expensive, squeezing pennies out of procurement is exactly where operators will look.

What Changed vs Last Week

Last week was all beef, all cost squeeze, Tyson's losses, Washington's flailing, no relief in sight. This week the story rotated back to the restaurants themselves, and the picture is more interesting than a simple squeeze.

Two things genuinely shifted. First, we finally have hard consumer data on the value war's scoreboard, and it says McDonald's lost the last quarter, but the customers didn't trade down to a cheaper burger, they traded sideways to Chili's and Texas Roadhouse. That reframes the whole thesis: the winners this cycle (Chili's, Dutch Bros) aren't the cheapest options, they're the most-chosen ones. Second, beef got its first green shoot, Mexican cattle crossing the border again, though the relief is a 2027 event, so it changes the long-term story without touching this year's costs.

And two overhangs resolved or eased. The cyclospora lettuce outbreak that grabbed Taco Bell's name last week was officially declared over (11,000+ sick, two deaths), taking the acute brand risk off the table. Meanwhile a new one appeared: a Starbucks barista boycott, small financially, but a fresh brand-and-labor cloud over a name that had been recovering. The beef intervention debate, for its part, didn't move an inch: every independent voice again pegged the import plan at a few cents a pound, not the dollar-fifty advertised.