Chili’s, Taco Bell and the casual-dining segment were some of the big winners in the restaurant industry this year.
Consumers cut back their restaurant visits this year, intensifying competition for eateries that are now fighting for a smaller pool of customers.
Prices for food away from home had risen 3.6% over the last 12 months as of November, according to the Labor Department's consumer price index. Grocery prices climbed just 1.6% during the same time, making cooking at home more attractive than dining out. The year started off slow, with declining year-over-year traffic in January and February, before visits picked up again in March, according to. But eateries struggled again over the summer as consumers tightened their belts. Even a slew of value meals that promised cheap burgers and fries couldn't stem the tide.this year, just one shy of tripling 2020's total during the pandemic, according to the Debtwire Restructuring Database.
Traffic tied to value menu deals climbed 9% through October compared with the year-ago period, according to Circana data.For one, the lift from the deals isn't enough to offset overall Industry experts attribute the decline in fast-food traffic largely to low-income customers. Diners who make less than $40,000 account for more than a quarter of both McDonald's and Taco Bell's customer bases, based on Numerator data.
Typically, when consumers tighten their belts in an economic downturn or recession, fast-food restaurants benefit. Even as low-income consumers cut back, higher-income consumers trade down to fast-food combo meals. But that hasn't happened this time as consumers who make more money have instead embraced a more holistic definition of value to decide where to spend their money. Those diners want a high-quality, satisfying meal more than they care about a deal.
Like McDonald's, Burger King launched a $5 value meal over the summer to appeal to thrifty consumers. Its same-store sales fell in the third quarter, although Restaurant Brands CEOthe business is much healthier than it was in September 2022, when the parent company formally launched Burger King's U.S. turnaround strategy.
But it isn't just those chains. Broadly, the fast-casual restaurant segment has seen traffic rise 3% through October compared with the year-ago period, according to Circana data. And dollar sales have increased 8% for the category. "Maybe they expanded too quickly and had other issues, and so they got into trouble," John Bringardner, head of Debtwire.announced he'd be taking over as chief executive, following his predecessor's ouster. Chipotle's stock fell and Starbucks shares soared on the news in a combined market cap swing of $27 billion, showing
This year's decline in visits follows years of waning demand for casual-dining chains. They've struggled to compete since the Great Recession, which brought the dawn of fast-casual options that offer high-quality food at cheaper prices with greater convenience.The segment's biggest losers this year were Red Lobster and TGI Fridays, which both filed for Chapter 11 bankruptcy.
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