The world's richest person lurks over premium-priced burritos, salad bowls, and hamburgers in Washington, D.C., like a bad case of food poisoning.
Billionaire Elon Musk taking a chainsaw to the federal workforce as part of his DOGE initiatives may hit sales at Cava (CAVA), Shake Shack (SHAK), Chipotle (CMG), and Sweetgreen (SG), according to new research from Bank of America analyst Sara Senatore.
The reason: an unsavory exposure to the government workforce on the hunt for lunch and dinner. If the workers aren't there amid getting pink slips from the DOGE team, then these concepts can't ring the register, so to speak.
The four fast-growing restaurant chains boast 231 combined locations in the Washington-Arlington-Alexandria metro area. Sweetgreen and Cava have outsized ties to D.C. — with the area measured by BofA representing 11% of their perspective store counts.
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Chipotle and Shake Shack, larger chains on a relative basis, have 4% and 3%, respectively, of their locations in the D.C. area.
A clock has already begun on each chain possibly feeling the long arms of Musk's cuts.
DOGE ordered federal government agencies to implement a large-scale reduction in workforce on Feb. 13.
February to date, initial jobless claims in Washington, D.C., have increased 248% year over year, per BofA. That marks an acceleration from an already robust pace in January, when initial jobless claims jumped 103% compared to the prior year.
BofA said the initial claims figure in D.C. could continue to climb as more cuts happen.
Traffic already appears to be coming under pressure for not only the aforementioned chains but also restaurants in the area more broadly.
BofA's data shows that foot traffic year to date in D.C. for fast food and quick-service restaurants has fallen 1.6% year over year. That's more pronounced than the 0.7% year-to-date drop in the U.S. for these restaurant categories.
For breakfast, coffee shops, bakeries, and dessert shops, the average year-over-year traffic growth in the D.C. area has declined 0.8% year to date. That contrasts with a 1.2% year-to-date increase for the U.S.
The layoffs are "raising concerns among investors about the implications for fast casual chains with relatively large DC area footprints," wrote Senatore.
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Shares of Cava, Shake Shack, Chipotle, and Sweetgreen are down an average of 23% year to date compared to a modest drop for the S&P 500 (^GSPC). Sweetgreen has been the worst performer this year, shedding 33%.
Musk has said close to $2 trillion in costs could be stripped out of government, though critics have disputed whether that level of cost cutting is possible without disrupting benefits to Social Security and Medicare.
If he can somehow get to that level of cost cuts, best believe a host of restaurants in the D.C. area will see a less brisk pace of sales.
Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.
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