Warmer weather typically drives an increase in restaurant sales, but inflationary pressures may temper this boost for the second consecutive summer. Consumers are cautious, impacting their dining choices.
Huy Do, research and insights manager at Datassential, highlights a divide between restaurant operators’ optimism and consumers’ hesitancy.
“Operators are hopeful for a good summer in foot traffic and sales, but consumers are more hesitant,” he said. Last summer saw a decline in restaurant visits from May to July as inflation concerns grew. Diners faced higher costs not just at restaurants but also at gas stations and grocery stores.
Chains like Sweetgreen and Chipotle observed a slowdown in sales post-Memorial Day, attributing it to factors such as inconsistent office returns and increased travel.
Shake Shack also noted a drop in sales in June, primarily from lower-income consumers visiting less frequently. However, sales rebounded in August due to higher consumer confidence and falling gas prices.
Despite some easing in inflation this year, rising prices, worries about regional bank failures, and a potential recession have dampened consumer sentiment. A University of Michigan survey reported U.S. consumer sentiment at a six-month low in May, driven by concerns over the debt limit standoff.
Restaurants adapt with value deals as inflation impacts dining frequency and consumer confidence.Datassential’s survey revealed that roughly a third of consumers plan to dine out less in the coming month, while about half intend to maintain their current spending levels. “Inflation and the economy are more top of mind for consumers than any anticipation for travel,” Do stated.
Nonetheless, nearly half of restaurant operators expect higher sales or improved traffic this summer, according to Datassential. The National Restaurant Association (NRA) is “cautiously optimistic” about the season, projecting the addition of over half a million seasonal jobs, assuming debt limit issues are resolved.
The travel industry is anticipating strong demand, with half of Americans planning to travel and stay in paid lodging this summer, up from 46% last year, according to a Deloitte survey. Travel and tourism typically account for about a quarter of restaurant spending, benefiting fast-food and fine-dining segments the most.
Even with a positive travel outlook, the U.S. restaurant industry faces challenges. Deloitte found more Americans planning international travel, which may not fully compensate for fewer domestic travelers. Additionally, only 53% of respondents plan at least one road trip, down from nearly two-thirds last year, impacting roadside fast-food restaurants.
Amid these dynamics, restaurants are adjusting by offering deals and promotions to attract cost-conscious diners. In the first quarter, traffic from deal-seeking consumers rose 8% year-over-year, according to Circana.
For instance, Noodles & Co. noted customer resistance to higher prices and plans to focus on value-oriented offerings. The chain reintroduced its popular 7 for $7 menu and added a $10 mac and cheese meal to cater to current consumer sentiment. “Given today’s consumer sentiment, we need to be more value-oriented,” CEO Dave Boennighausen told CNBC.