Technomic Talks the State of the Industry

The Vibe Advisory Council held a planning meeting in Austin, Texas earlier this month, and Technomic Senior Principal David Henkes started things off with a look at the current state of the restaurant industry.

Henkes noted that the industry has plateaued amidst a rocky economic climate. While job growth continues, disinflation (reduction in the rate of inflation but not a full stop), mixed signals on consumer spending, and the recent banking crisis has rattled markets and consumers.  

Despite economic slowdowns and a possible recession (so far, fears of a recession have shown up mostly in the psyche of business owners versus their bottom lines), the restaurant industry is well positioned to weather the storm. Henkes named a few reasons for this:

  • The industry offers two things consumers want: convenience and experiences 
  • Consumers are also seeking affordable indulgences they can’t get at home—complex cocktails, limited-time offers, etc.
    • Consumers view eating out and ordering alcohol as a way to treat themselves 
  • Due to the upheaval of the last few years, there are fewer restaurants chasing the same profits

Serving an Experience

Despite economic stressors, consumers are hesitant to completely cut dining out as they view it as an affordable luxury or indulgence. What they have done instead is cut the frequency of their visits due to rising prices.

Henkes said consumers are accustomed to rising prices because they are going up in the grocery stores too, but there is still some price sensitivity.

Henkes offered a few statistics:

  • 84% of LDA consumers have noticed menu price increases  
  • 8% of consumers won’t order from a restaurant if prices continue to go up  

  • 59% won’t order from a restaurant that raises entrees by $2-$6  

So there are price thresholds to keep in mind as restaurants try to recoup profits by raising prices. The good news is when consumers do dine out, it's typically for a celebratory or special occasion, and they are willing to spend more by trading up to premium products. In fact, according to Henkes, 76% of operators believe people are ordering more premium beverages, and consumers believe ordering a higher-priced alcoholic beverage makes the occasion special. 

Guests aren't just seeking premium food and beverage when they dine out—they are also looking for premium experiences, so it's important that the guest experience your establishment provides is on point at all times.

Where & When

Henkes also covered the changes in how consumers are ordering and when. 

He said certain dayparts have been challenged, including snacks and beverage-only occasions, which are both in decline. He says lunch and dinner are plateauing while breakfast and nighttime occasions are growing. 

How consumers order has changed as well. Spurred on by the pandemic, digital and phone ordering is still big, but in-location ordering has rebounded and is growing.


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