McDonald’s largest french fry maker lays off hundreds as Americans turn away from fries

Fortune · Andrey Rudakov/Bloomberg—Getty Images

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It turns out that, no, fast-food eaters would not like fries with that. As more customers lose their appetite for fast food over sky-high prices, North America’s largest fry producer is reeling from the slowdown.

Lamb Weston, which can churn out 250 million pounds of frozen potato products annually at just one facility, announced earlier this month that it would lay off 4% of its workforce (about 428 workers) and shut down its Connell, Wash., production plant. Since the beginning of the year, its share price has plummeted by about 33%.

A Lamb Weston spokesperson told Fortune the closed plant was an older facility representing only 5% of the company’s capacity.

CEO Tom Werner said on an Oct. 1 earnings call that quick-service burger chains in particular are to blame for Lamb Weston’s slump. Traffic at those restaurants decreased 3% in the company’s first quarter, while restaurant traffic overall slumped 2% year over-year. Werner expects traffic to continue to falter through fiscal 2025.

McDonald’s is Lamb Weston’s largest customer, accounting for 13% of its sales. The potato processor also produces fries for Yum Brands, which owns KFC and Taco Bell.

Menu price inflation has turned fast food into a luxury for many consumers, meaning industry titans like McDonald’s and Wendy’s have struggled to attract consumers, let alone get them to splurge. McDonald’s same-store sales shrank 1% last quarter, and while Yum Brands reported a 4.5% bump in year-over-year revenue for its second quarter, it fell short of expectations due to disappointing sales.

“At the end of the day, we expect customers will continue to feel the pinch of the economy and a higher cost of living for at least the next several quarters in this very competitive landscape,” McDonald’s U.S. President Joe Erlinger told investors in July.

French fries as an economic indicator

Werner argues that french fry sales are generally a good indicator of economic health. They are usually one of the more expendable fast-food side items and are nixed from orders when consumers feel penny-pinched. But during healthy economic times, they’re the first side that customers add to their order. Werner called this the “fry attachment rate” in a CNBC interview last October.

Despite the fry attachment rate actually increasing to 24% in 2022, compared to 22% before the pandemic, Lamb Weston has continued to struggle as the fast-food industry adapts to a difficult environment. McDonald’s CEO Chris Kempczinski acknowledged in February more consumers are turning to home-cooked meals to save money. Beyond that being bad news for McDonald’s, it’s also trouble for Lamb Weston, which said that 80% of all frozen fries products consumed in the U.S. comes from fast-food restaurants.