Restaurant traffic is down, menu prices are up

Consumers limited trips to restaurants during the second quarter of 2022, according to the NPD Group. Inflation and menu price increases led to a 2% dip in physical and online restaurant traffic compared to a year ago and down 6% below pre-pandemic levels of 2019.

“Consumers continue to deal with rising inflation and higher prices. We see three ways consumers respond to higher menu prices. They trade down to lower-priced items, cut back on the number of items ordered, or reduce restaurant visits altogether,” said David Portalatin, NPD food industry advisor and author of “Eating Patterns in America.”

He said operators and manufacturers can win in this environment by differentiating value, understanding that value doesn’t always translate to the lowest price. Quality and value become critical differentiators when consumers spend on a restaurant meal during these challenging times.

NPD said visits to quick service restaurants (QSR), which represent 82% of total restaurant visits, declined by 2% in the second quarter. QSR fast-casual restaurant traffic was down 1% in the second quarter of this year compared to a year ago, and was up 8% versus the same quarter in 2019.

“Full-service restaurant (FSR) visits, representing 18% of restaurant visits, were down 3% in the quarter versus a year ago and declined by 20% compared to the second quarter of 2019,” the report stated.

NPD found dinner traffic dipped by 2% when compared to the year-ago period, lunch dropped by 3%, and the P.M. snacks fell by 6%. Breakfast remained flat compared to a year ago, faring the best out of the meal occasions. While consumers are making fewer trips to restaurants, overall spending was up 2% in the second quarter and 3% higher than the pre-pandemic year of 2019 from higher menu prices.

The National Restaurant Association reported menu prices rose 7.7% during the past year as of June, which presented the largest year-over-year increase since 1981. Even with menu prices rising at multi-decade highs, the trade association said the gains appeared tame compared to the sharp increase in what consumers are paying for other items such as fuel and natural gas which rose 59.9% and 38.4%, respectively, over the same period, the trade group noted.

The recent increase in menu prices taken resulted from higher input costs – particularly food and labor, according to the trade group. Full-service restaurant menu prices increased 8.9% between June 2021 and June 2022, while prices for limited-service meals and snacks were up 7.4%. Regionally menu prices were up 8.1% across the Midwest, 7.8% in the South, 7.6% in the West and 7.1% higher in the Northeast.

Texas Roadhouse is boosting prices again in October following a 4.1% price hike in October 2021. The Kentucky-based steakhouse chain said its customers are getting back to normal habits despite higher menu prices. That said, the restaurant chain did report traffic softness intensifying in July after solid second-quarter earnings were reported through June.

“In the second quarter, we saw our return to our historical seasonal sales trends, which we did not have in 2020 or 2021,” Texas Roadhouse CEO Jerry Morgan said in a recent earnings call. “As a result, we experienced a slight decline in our year-over-year total traffic as the increase in our dine-in guest counts was offset by a decrease in the to-go guests.”

Texas Roadhouse reported same-store sales growth of 7.6%, with average check size increasing 8.4% over the year-ago quarter. The business reported dining room traffic up 3.8%, while online to-go orders declined sharply. Guest traffic declined 0.8% overall. The business also reported a lower 4.1% net income on revenue gains, up 14% from the year-ago period.