Casual Dining Restaurants Took A Sales Hit In Late 2023
It seems like a given that a years-long nationwide recession will see winners and losers. "Girl dinner," for instance, was a total winner. Sit-down casual restaurants, on the other hand, didn't enjoy the same victory last year. In the second fiscal quarter (Q2) of 2023, same-store sales were up by 6% or more industry-wide, which dropped to 2.8% in Q3, and finally fell to 1.7% by Q4, reports Restaurant Business. But, that still counts as growth, right? Technically yes, but these consistently falling figures might indicate a more dire industry forecast. Still, there have been exceptions to these grim trends. For instance, Wingstop had an awesome 2023, and full-service health foods concept First Watch demonstrated 5% same-store sales growth.
The primary culprit is inflation, which has kept restaurants' operating costs relentlessly high and kept consumers' wallets scant. Looking forward, Mintel's Economic Outlook Report predicts, "Some consumers will see the rising cost of eating at home as a reason to dine out," but that in general, consumers are likely to select eateries that emphasize high-value, quality food, decent portion sizes, and pleasant atmosphere.
It's been tough enough for beloved neighborhood favorites to avoid shutting down, let alone for new dining concepts to open. (It's not easy being green.) As of February 2023, there were roughly 72,000 fewer restaurants in America than there were in 2019. Could this period of economic difficulty usher in an era of stagnation across the food scene at large?
The casual dining landscape is changing, and not necessarily for the better
Casual dining concepts are all about frequent, loyal customer visits and dependable reputation, and for these businesses, value positioning is more important than ever. As consumers' discretionary spending grows smaller and smaller, outings like a restaurant visit are often among the first things to go. Indeed, Olive Garden noted that its lower-income customers have been the first demographic to stop showing up in late 2023.
In 2023, full-service casual dining restaurants were outpaced by fast food chains even as fast food prices continue to skyrocket — which has also deterred many customers from swinging by the drive-thru for quick dinner on a busy weeknight. Other full-service casual dining concepts have been looking to offset inflation by passing the costs off onto customers. Last month, Texas Roadhouse raised its menu prices for the third time in under a year.
Aside from money, the hit to casual dining concepts could also have to do with a larger shift in consumer preferences post-pandemic. According to a September 2023 report by investment platform Matthews, lots of folks just aren't digging the sit-down experience anymore, instead preferring takeout and delivery-focused concepts, which has left many restaurants scrambling to adapt. The shift has been further exacerbated by rapidly developing technology on the convenience and efficiency front. For many businesses, keeping pace with consumer tastes demands a total restructuring of longstanding business models.