Why Inflation is Pushing Restaurant Consumers Downmarket

Sam’s Thoughts:

Hi there. I’m Sam Oches, Editor in Chief of Nation’s Restaurant News. Restaurants have been battered by inflation in the past year. You’re especially seeing this in the increase in cost of goods. They have had to pass this along to the customer by increasing their prices. A lot of the restaurants in the past year or so have increased their prices by about 10%.

The result has been that their sales are going up. We’re seeing now in the reports of Q3 earnings. That a lot of the restaurant companies, major restaurant companies, their sales are up, but that’s mostly due to the fact that they’re increasing their prices. Traffic is not up as much as sales are.

And in fact in some instances it’s down. Customers are responding to inflation, of course. They’re trading down. They might be going from casual dining to fast casual. Fast casual to quick service restaurants. They’re looking for cheaper meals. Respo restaurants are also offering some value opportunities.

They’re bundling and trying to find ways to get customers in the doors through more perceived value. Restaurants are also trying to streamline their costs by looking toward technology and other. Labor saving opportunities as a way to save money and not have to continue passing the increased cost onto customers, particularly as we head toward a recession and restaurants very much would like to see consumers continue to come in the doors, turn to restaurants for their meal occasions.