More than half of customers say they experienced sticker shock the last time they dined at a fast food restaurant. | Photo: Shutterstock.
As restaurants have aggressively raised prices over the past few years, they have put themselves in danger of losing any value that consumers attached to them.
Lisa Miller, consumer strategist and author of The Business of Joy, told the Restaurant Finance and Development Conference that only 31 percent of consumers in a survey said they felt their last restaurant visit was “worth it.”
Specifically, 52% of fast-food customers and 49% of full-service customers experience “sticker shock” when visiting a restaurant. “We’re not providing the experiences and occasions they want,” Miller said.
Fast food prices, in particular, have held steady at higher levels than prices at full-service restaurants or even groceries, and are now rising almost twice as fast as inflation.
Prices at limited-service restaurants have increased 6.2% over the past year. By comparison, prices at full-service restaurants rose 4.3%. Inflation was only 3.2% during this period. And food at grocery stores rose 2.1% during that time.
Perhaps more accurately: fast food prices over the past four years have risen 29% compared to October 2019. This means that a $30 meal at a fast food restaurant four years ago now costs $38. That doesn’t include the advice that customers are much more likely to get now than they were four years ago.
Industry traffic fell 2.5 percent in October, according to data firm Revenue Management Solutions. Industry executives lamented the lack of traffic, and lenders at the conference also noted that driving traffic in a positive direction is key for them to get financing.
“Everybody has same-store sales growth because they’re raising prices,” Todd Maldonado, BMO’s managing director, said at the conference. “What we care about is transactions.”
Brands are pushing for more traffic, but those efforts are more muted, limited to specific products like Dollarita at Applebee’s or mobile app customers. But many brands have raised the prices of their bargains, and some have eliminated them, as Wendy’s did with its 4-for-$4 menu, at the behest of franchisees. Domino’s also raised the price of its $5.99 menu item to $6.99.
But the strongest restaurant chains aren’t driving value, said Neil Culbertson, founder of consulting firm Growth Partners. He noted chains like Jersey Mike’s, Chipotle, Texas Roadhouse and In-N-Out that have “built-in brand value.”
Of course, customers want an affordable price – 40% of quick-service customers said an affordable price would make their visit “worth it”, topping the top 10 selections they offer, just ahead of “consistent food quality” (36% ) and special offers and discounts (34%).
However, some of the traffic building initiatives that the companies offered were not so popular. “Fast and efficient service” was chosen by only 21%, and “easy customization of my orders” was chosen by 20%.
Miller said customers will pay for restaurants that give them what they want. “People are willing to pay,” she said. “It just has to be worth it.”
Our members help make our journalism possible. Become a member of Restaurant Business today and unlock exclusive benefits, including unlimited access to all of our content. Register here.