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CNN
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Americans are rising up against McDonald’s and fast food chains. This harms chip suppliers such as Lamb Weston.

Lamb Weston, the largest producer of French fries in North America and a major supplier to fast-food chains, restaurants and supermarkets, is closing a production plant in Washington state. The company announced last week that it would lay off nearly 400 employees, or 4% of its workforce, and temporarily shorten production lines in response to declining customer demand.

Shares of Lamb Weston (LW) are down 35% this year.

The potato giant has an oversupply at a time when demand is weak. Restaurant prices have risen faster than supermarket prices in recent years, causing customers to withdraw from fast food chains.

This shift has taken a toll on Lamb Weston, as people are less likely to prepare fries at home. According to Lamb Weston, approximately 80% of the fries consumed in the United States come from fast food chains.

Fast food chains like McDonald’s dangle value menus to lure customers back. McDonald’s has launched a $5 meal that includes a McDouble cheeseburger or a McChicken sandwich, small fries, 4-piece chicken nuggets and a small soft drink. But these deals don’t help Lamb Weston as people buy smaller portions of fries.

“Many of these promotional meal deals are causing consumers to trade up from mid-size to small fry meats,” Lamb Weston CEO Thomas Werner said during an earnings call last week.

Lamb Weston did not immediately respond to CNN’s request for comment.

McDonald’s, its largest customer, accounts for 13% of Lamb Weston’s sales. As McDonald’s goes, so goes Lamb Weston.

And McDonald’s is struggling. The turnover of American restaurants that have been open for at least a year fell by 0.7% last quarter compared to the same period a year earlier, due to the fact that fewer customers visited the chain.

Lamb Weston also has significant exposure to other fast-food chains, analyst RJ Hottovy of analytics firm Placer.ai said in a research note to clients last week.

According to Lamb Weston, customer traffic to fast food chains fell 2% last quarter and 3% the quarter before compared to the same period last year.