The Iran War has sent gas prices soaring over the past few weeks, from below $3 per gallon to $4.14, according to the website GasBuddy.
Exactly how much they will continue to rise is uncertain. The U.S. Energy Information Administration has projected that gas will peak at $4.30 per gallon this month before settling down.
Yet that’s also proven difficult to predict. GasBuddy has avoided any projections, citing oil price volatility and uncertainty regarding the potential duration of the conflict. Yet as it is, the price of oil has doubled this year to date, and some economists are suggesting it could increase a lot more.
But exactly how much of an impact could this have on restaurant sales? BTIG analyst Peter Saleh said that an analysis of industry traffic has not supported the idea that gas prices will impact restaurant traffic.
According to Black Box Intelligence, however, there is an impact, and that also leads to a change in where consumers dine out.
The data firm said that, once gas prices hit $3.50 in the U.S. on average, restaurant traffic starts declining.
Since 2017, monthly industry traffic has averaged a 2% decline. But when gas prices have exceeded $3.50, that traffic falls to a 2.4% decline. When the price exceeds $3.80, traffic falls 2.9% on average.
Maybe more to the point, some restaurant chains feel it more than others.
Family-dining chains in particular lose customers when gas prices rise, followed by casual-dining chains.
But limited-service brands get more traffic. Fast-casual chains in particular have the strongest positive correlation, according to Black Box.
The dynamic is especially pronounced with delivery. When gas prices rise, use of delivery declines, except for quick-service restaurants that are larger and are more likely to absorb whatever fees come along the way.
Fine-dining, on the other hand, remains insulated. A $4-per-gallon gas charge is hardly going to influence a $100 steak dinner, apparently.
“When gas prices cross that $3.50 threshold, we don’t just see a reduction in consumer spending, we see a fundamental migration of market share,” Victor Fernandez, chief insights officer for Black Box, said in a statement.
He call this a “prime acquisition moment” for limited-service brands, which can get customers at a time of high gas prices. Fernandez said that full-service brands should focus on what they do best. “You cannot outprice the gas pump, so you have to double down on the experiential factors—service speed, consistency and perceived value—to ensure that you don’t lose your core guest,” he said.
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