Restaurant companies have aggressively provided consumers with discounts in a variety of formats. And customers are apparently snapping them up.
According to analysis from the data firm Circana, 29% of commercial foodservice traffic over the past 12 months is on a deal. That was the highest rate recorded in 50 years.
What’s more, the rate of discount shopping in the foodservice space is up 3.1 percentage points since 2022. That’s a surge not seen since the 2008-2010 downturn, when a financial crisis prompted the worst economic slowdown in nearly a century.
According to the group’s analysis, the U.S. foodservice industry has faced a challenge like this twice before: In the late 1970s and the late 2000s, after high inflation resulted in multi-year declines in restaurant traffic.
One of the key differences between this period and 2009 is the manner in which these discounts are distributed.
Back then, clipped coupons were common. Today, digital coupons are the norm, largely through companies' mobile apps and loyalty programs.
Companies are also pushing discounts through high-cost services such as third-party delivery. More than half of the orders made in an Intouch Insight study for Restaurant Business earlier this year featured some sort of offer.
Comparisons to the late 1970s and the Great Recession are disconcerting from the restaurant industry, because such periods led to absolute declines in restaurant sales, a relative rarity for an industry that typically weathers recessions relatively well.
This instance, much like that in the late 1970s, restaurant deal-seeking followed a high rate of inflation, prompting consumers to seek out discounts to offset what those higher menu prices.
Restaurant menu prices soared coming out of the pandemic, as labor shortages led to a double whammy of higher wage rates and food costs. Restaurants raised menu prices to offset their own higher costs, and they continue to raise prices at rates higher than overall inflation.
In this instance, higher-income consumers are seemingly better off, buoyed by higher home and stock prices. That is providing at least some cushion for restaurant chains, which can get customers in the door with aggressive marketing campaigns, new menu items and other strategies.
Restaurant chains are aggressively using those campaigns to get customers in the door without discounts. Chains are releasing a record number of limited-time offers and have pushed more partnerships with television shows, movies and other media, all in a bid to generate traffic.
None of it has worked, at least consistently, to pull in traffic to a broad set of restaurant chains. Same-store sales for publicly-traded chains remained largely muted last quarter, even as chains like Chili’s and Applebee’s bucked those trends. McDonald’s, the world’s largest chain, took the unusually aggressive step of lowering prices on a broad set of combo meals in a bid to reverse its own traffic headaches.
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