McDonald's fry supplier lays off hundreds as U.S. consumers cut back due to rising fast food prices

Lamb Weston, the largest French fry producer in North America, is feeling the effects of the fast food industry’s ongoing struggles. The company recently announced the layoff of 4% of its workforce, equating to about 428 employees, and the closure of its Connell, Washington production plant. This decision comes as consumers pull back on fast food purchases due to soaring menu prices, causing a significant slump in demand for frozen potato products.

The closure of the Connell plant, which accounted for 5% of Lamb Weston’s overall production capacity, reflects the broader economic challenges facing the fast-food sector. Since the start of 2024, the company’s stock has plummeted by 33%, signaling its struggle to adapt to the changing consumer landscape.

During an earnings call on October 1, Lamb Weston CEO Tom Werner pointed to declining traffic at quick-service burger chains as a key factor in the company’s downturn. Burger chains saw a 3% drop in customer traffic in Lamb Weston’s first quarter, while overall restaurant visits dipped by 2% year-over-year. Werner cautioned that traffic is expected to decline further through fiscal 2025.

McDonald's, Lamb Weston’s largest customer, represents 13% of its sales, while other major clients include Yum Brands, the parent company of KFC and Taco Bell. Both fast food giants have been affected by menu price inflation, which has made dining out more of a luxury for many consumers. In fact, McDonald’s same-store sales dropped 1% last quarter, while Yum Brands saw a 4.5% year-over-year revenue increase, which fell short of expectations due to lackluster sales.

Rising living costs have led more consumers to opt for home-cooked meals, impacting the fast food industry and, by extension, French fry sales. Werner explained that French fries are often one of the first items to be cut from fast food orders when consumers feel financially strained. In better economic times, however, French fries tend to be a popular addition to orders, with a “fry attachment rate” that peaked at 24% in 2022, up from 22% pre-pandemic.

Despite this increase, Lamb Weston continues to face headwinds as fast food chains, particularly McDonald's, adapt to evolving consumer behavior. Notably, McDonald’s CEO Chris Kempczinski acknowledged earlier this year that more Americans are choosing to cook at home to save money, adding further pressure on suppliers like Lamb Weston, whose frozen fries are primarily consumed in restaurants.

As economic uncertainty looms, both fast food giants and their suppliers face a challenging road ahead in 2025.