For much of 2022, we (and many others) remarked at the resilience of the U.S. consumer, who was continuing to dine out despite historically high prices.
To be sure, there were concerns about low-income diners, especially as gas prices spiked during the summer. But for the most part, the U.S. consumer continued to use restaurants through the end of 2022. When 2023 began, they flocked to chains like Texas Roadhouse and Olive Garden.
Is that beginning to change?
More operators are saying they’re seeing sales take a tumble. And plenty of data is backing them up. Consumers are stretched after a 2022 marked by generationally high inflation. Household debt levels are soaring and more people are struggling to pay their bills. All of that is pointing to a consumer that may be starting to cut back and make spending adjustments.
According to the latest survey of 800 U.S. consumers from Revenue Management Solutions, for instance, 61% of consumers say they are ordering less from restaurants, a 15-percentage-point increase from the same survey a year ago.
And 40% of respondents are choosing less expensive restaurants, up 10 percentage points from a year ago.
Interestingly, the most notable changes are coming from higher-income consumers. The number of customers who say they are dining at quick-service restaurants more often fell from 33% in the third quarter of last year to 21% in the first quarter this year. Other segments declined at similar rates. And, according to RMS, higher-income households have driven much of the decrease.
The same holds true with delivery. The percentage of customers who say they order delivery at least once a week decreased by 13 percentage points. Yet it dropped by 25% with higher-income households.
To be sure, it’s one thing for consumers to say they’re cutting back and another for them to actually do so. Yet restaurant and bar sales declined 2.2% month-to-month in February, for instance. And several operators we’ve spoken with have suggested they’re seeing an impact on their own results.
Customer traffic, meanwhile, remains down, according to data from Placer.ai. For the week ended March 20, for instance, traffic was down 3.9% at all restaurants. At quick-service restaurants, traffic was down 2.2%. At full-service restaurants, however, the decline was 7.1%.
Some weakening numbers could be expected this spring, particularly when compared with a year ago, as the industry begins to compare itself with a strong recovery from the pandemic. In addition, there remains considerable noise in the data as consumers continue to shift to more normalized behaviors and away from some of their pandemic-related actions.
At the same time, there is at least some cause for concern on the part of operators. Layoffs have started to spread, as illustrated by the actions of McDonald’s this week. Consumers stretched themselves in 2022 so they could afford the higher price of just about everything.
Household debt reached $16.9 trillion in the fourth quarter of last year, up $394 million from the third quarter—the highest level of increase in 20 years, according to the New York Fed. Credit card balances, meanwhile, were $986 billion, surpassing their pre-pandemic highs.
Younger consumers, in particular, are struggling with credit card and auto loan payments.
As such, it could be expected that consumers this year will slow their restaurant spending. The resilience they’d demonstrated even through the early part of 2023, in other words, may be starting to evaporate.