Americans feel restaurants are getting more expensive and are visiting, and spending, less as a result.
But operators can convince them to come in with the right type of value offer.
That, at least, is according to a pair of surveys published this week by Revenue Management Solutions, a global information firm focused on the restaurant industry.
More than three-quarters of customers in a survey said that restaurant prices were higher or “much higher.”
More than a quarter of customers felt that restaurant prices were “much higher” than they were a month ago, the highest percentage since the firm began conducting such surveys early last year.
Interestingly, 80% of consumers said they believe grocery prices are higher or much higher. Consumers may be trading out of restaurants, but when they do, they’re not exactly splurging.
That result demonstrates that concern about inflation isn’t only with restaurants, even though restaurant price inflation has exceeded grocery inflation for well over a year. Last month, restaurant prices were up 4.1% year over year, compared to 1.1% at grocers. Yet, as my colleague Heather Lalley noted, even dollar stores are struggling with the consumer right now.
Unsurprisingly, lower-income consumers were far more likely to say prices are “much higher.” Among those making $50,000 or less, 30% said prices are much higher. By contrast, 21% of those making over $100,000 say prices are much higher.
People continue to react to higher prices by dining out less often. A plurality of people in the survey, 39%, said they are spending less of their income at restaurants, compared with 33% who said they are spending more.
Nearly three-quarters of those who say they’re spending more blame higher prices for their higher spending, and not more frequency. That was up 6% compared with the first quarter, according to RMS.
The study is indicative of consumer concern about the state of restaurant prices right now. Diners believe that prices are higher. They’re visiting less often as a result, to the point they’re spending less, which hurt sales at many chains. Traffic at quick-service restaurants was down 2.3% last quarter, according to RMS.
And consumers appear reluctant to say they will spend more in the future. When asked, consumers broadly say they plan to use fast-food less often.
But they were particularly bearish on delivery, with 28% of consumers saying they plan to use that format less often. Still, 20% said they plan to use takeout less often, 18% said they will use dine-in less often and 13% will use the drive-thru less often. All those numbers have grown over the past year.
Take any study on what consumers intend to do with a grain of salt, as it often reflects current sentiment and not actual plans. Still, those numbers suggest the mentality of the restaurant customer is not great right now.
Several companies have clearly bucked this trend, including names as varied as Chili’s and Cava. Taco Bell’s 5% same-store sales result was easily the best among traditional fast-food concepts, where sales weakness was common.
Another study from the firm does provide some insight into the type of value consumers respond to the most.
Two-for-one deals or bundled meals, both of which have been more common in recent years, appear to be most popular. Twenty-five percent of respondents say they prefer either a buy-one, get-one burger or two burgers for $5. Eleven percent prefer the $5 meal deals featuring burgers and nuggets, such as those offered this summer at McDonald’s and Burger King.
On the other side of the ledger: Promotion days. Only 4% said they like offers that are only available on certain days.
For the most part, customers told RMS that they prefer promotions featuring “familiar menu items at clearly discounted prices and straightforward, pre-selected meal options.”
The surveys just provide more evidence on the state of the consumer and their views of restaurants. Consumers are cutting back on their dining in general, while gravitating to those concepts they consider to be a better overall value.