The Surprising Way Some Chain Restaurants Are Reacting To Inflation
CORRECTION 7/12/22: A previous version of this article named Micha Magid as Mighty Quinn's BBQ's CEO, Magid is co-CEO.
It is a fact that our spending habits have changed, particularly since inflation has hit the highest it has been in more than four decades. But the lifestyle changes we've made in response to record inflation have hit the food and beverage sector particularly hard, with 53% of adults saying their eating and drinking habits have been impacted by inflation, per Morning Consult. Those changes include dropping branded goods in favor of generic or store brands, using coupons to shop and save, going to different stores in search of deals, and buying more during a sale to stock up on items they need, per Morning Consult.
Price sensitivity isn't just being seen at the grocery check-out; it's being keenly felt at restaurants too. CBS 8 cited one survey reported in May by New First Insight, showing that 42% are saving by making changes to their dining out habits, while 33% are spending less on entertainment. Another survey, reported by QSR and conducted by industry sales and marketing provider Acosta, showed 54% of people were eating out less, and of those that were still going out, 33% were picking less pricey restaurants instead of giving up dining out altogether.
Limited time offers and value meals are back on the menu
For a while, it seemed as though special deals and discounts at restaurants had gone the way of the dodo, particularly since, as industry publications like QSR pointed out, menu prices were up 9% at casual dining restaurants, and 7.3% at fast food outlets. The Wall Street Journal even reported that price hikes triggered by increases in areas like labor and transport would be passed on to restaurant guests, as they sought ways to raise prices without scaring off diners.
But instead of shying away from offering specials, a number of smaller chain restaurants appear to be embracing them — at least for now. Restaurant Business points to Bertucci's Italian as an example, which pushed limited-time offers with items that cost no more than $6. During the promotion period, diners were allowed to choose from menu items ranging from appetizers to entrees and desserts. As Robert Earl, founder of Bertucci's owning company put it, "these are challenging times for so many, and it was important for the Bertucci's family to do something to offer a bit of relief—and this throwback menu should help."
Deals seen as a way of giving back to customers
Other restaurant chains like Tennessee's O'Charley's offered fourth of July gift cards at half their face value for four days, leading to what Restaurant Business said was a 50% increase in gift card sales. Smaller restaurants haven't even gotten into the act, with Little India Restaurant & Bar in Denver, Colorado, offering $10 all-you-can-eat lunches throughout the month of July.
Not everyone is able to ignore inflation and bring customers back by offering loss-making menu items. CNBC admits bigger restaurant chains have a better ability to navigate the turbulent waters churned up by inflation because they can buy ingredients under different payment terms. As a result, they can get better deals on raw materials. But some restaurants are choosing to give back to customers, instead of taking more profit for themselves. As U.S. East Coast-based Mighty Quinn's BBQ's Co-CEO Micha Magid put it: "Sometimes during these high inflationary environments, companies use it as a cover to raise prices because everyone else is doing it. That can't go on forever. We wanted to take a stand that we're not going to participate in this part of the cycle."
And because no good deed goes without consequence, Restaurant Business says Mighty Quinn's has seen more customers walking through their doors since their prices dropped.