Fast-food restaurants are slowing their price increases and are unleashing a torrent of value offers, but it doesn’t appear to be generating consistent traffic growth.
Data from industry and federal sources show that fast-food restaurants have slowed their price hikes in recent months as operators shift into traffic-building mode amid weakening overall sales.
But that doesn’t appear to be helping traffic all that much. Traffic fell 0.9% year over year at quick-service restaurants in May, according to data from Revenue Management Solutions (RMS). That was the fourth time in the past six months—and 12th time in the past 16—that traffic has been down, according to that index.
The average price at quick-service restaurants in May rose just 0.8%, according to RMS, the lowest rate in years and continuing a steady downward pricing trend.
It also reflects federal data, where limited-service restaurant prices rose 3.5% year over year in April, and 0.8% month over month.
The restaurant industry has struggled through some anemic results over the past year and a half, largely due to weakness among lower-income consumers. Total chain sales grew just 3%, according to data from Restaurant Business sister company Technomic. They grew just 2.4% at quick-service restaurants.
Restaurant chains have raised prices some 40% some 2019, largely in response to soaring costs for labor and food. Fast-food chains in particular have faced pressure more recently if they operated units in California—the country’s biggest restaurant market—where the minimum wage for limited-service chain restaurants was recently raised to $20 an hour.
The result led consumers, particularly those with lower incomes, to cut back on their dining.
In response, restaurant chains have introduced a wide selection of value offers designed to boost traffic. McDonald’s creased a new McValue menu, for instance. Wendy’s will spend its summer offering value. Subway, KFC and others have pushed more price-based promotions and even fast-casual burger chains like Shake Shack and Habit Burger & Grill have started offering combo meals.
The pricing data demonstrates that fast-food restaurant operators have slowed their price hikes in a bid to keep customers.
But the traffic data shows that it could be a while before the fast-food sector gets its customers back.
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