The year has been marked by shifting priorities as inflation maintains a firm grip on the US economy.
For those in the food industry, it’s a battle over managing prices while dealing with limited supplies and labor. Consumers, however, have had to redefine how they spend their money, as well as how they earn it.
Most American workers have changed their spending habits due to inflation, and it’s impacting how they view their jobs. A recent Bluecrew survey showed that almost 60% have been looking for new or additional roles in the past year. Half of the respondents plan to land seasonal jobs during the holidays.
Meanwhile, a recent Qualtrics study found that about half of Americans are considering a second job due to high inflation. This survey of 1,000 adults found that 38% had looked for a second job, with interest in gig work rising, reports CBS News.
With so many people watching their income and spending, what counts as value versus luxury is changing. Not only is going out to eat considered more luxurious, but consumers are looking to eliminate any kind of unnecessary food expenditure unless they see more value in the product.
So what’s the value, anyway? The answer may change depending on demographics, but if restaurants can avoid certain pitfalls while cultivating continued business, they will emerge from this economic period relatively unscathed.
According to Revenue Management Solutions, Gen Z and millennials represent a key consumer base for restaurants. Overall, younger consumers have spent more on restaurants this year, are increasingly using drive-thru and are driving the most delivery orders. The data suggests they are slightly more concerned about poor service and are less affected by higher prices, but not all consumers agree.
Many companies have raised prices to offset supply chain costs or changed their menus, but this can be risky for restaurants. “Shrinkage,” or being served smaller items for the same price, is one of the main reasons consumers downgrade restaurants. Being shortchanged on portion size is enough to draw many customers to competitors who keep menu items consistent even as their prices go up.
RSQ magazine reports that more than 75% of consumers said they notice restaurants and retailers using this tactic. To avoid raising prices or minimizing menus, some restaurateurs are looking to other areas to cut costs, such as finding alternative suppliers or preparing ingredients in-house. At Austin taqueria Granny’s Tacos, owner Rey Hernandez scours wholesale markets for deals, mixes his own seasoning and has even spent hours carving Costco chuck roast during a carne asada shortage, according to Austin Eater.
Another alternative to drastic menu item and price changes is for restaurants to adopt dynamic pricing models that can leverage data to make regular price adjustments that won’t be so intimidating to consumers. Regional franchise Layne’s Chicken Fingers has begun to manage core costs, food and labor more, with more focus on productivity rather than percentage targets, according to RSQ magazine.
This allows the fried food chain to offset higher production costs by examining other areas for potential savings while maintaining a focus on customer satisfaction.
Carefully cutting operational expenses is one strategy, but there are also ways restaurants can create perceived value that appeals to the frugal customer. Many consumers derive value from convenience. Among fast-food restaurants, leaning into drive-thru and online ordering has been a recipe for success with customers looking for quick and easy meals.
Offering enticing combo deals and a robust value menu are also effective ways to combat price gouging. Now more than ever, customers are looking for fast food promotions that can save them money, as well as inexpensive yet satisfying alternative menu items.
As the economy continues its path, the restaurant industry remains in a precarious but not unmanageable position. Restaurants that can strike that perfect balance between competitive pricing and customer satisfaction will be in the best position when economic fortunes eventually improve.