Due to inflation, menu prices have been rising, causing many Americans to be reluctant to dine out. In order to retain customers, some larger chain restaurants in the United States, such as McDonald’s, Chili’s, Applebee’s, etc., are actively implementing price cuts and promotional activities.
Over the past four years, rising prices have been a major concern for most Americans. In the November 2024 presidential election, many voters, when heading to the polls, told pollsters that the economy and inflation were decisive factors in how they voted.
According to data collected by the U.S. Bureau of Labor Statistics (BLS), the rate of increase in dining out costs has been even higher than the overall inflation rate.
According to the Consumer Price Index (CPI) data published by the U.S. Bureau of Labor Statistics, the cost of dining out for Americans increased by about 36.7% from January 2019 to November 2024. In comparison, the overall CPI during the same period rose by about 25.3%.
In 2024, the personal finance website FinanceBuzz released a research report on the rise in menu prices at fast-food chain restaurants over the past 10 years. The latest data in the report, published on November 12, 2024, indicated that the price increases at all major dining chain restaurants in the U.S. exceeded the overall inflation rate.
The fast-food industry leader most affected by price hikes was McDonald’s. According to FinanceBuzz, over a decade-long observation period, the prices at McDonald’s have increased by at least 100%. For instance, the “Dollar Menu” from 2014 – including a McDouble cheeseburger and McChicken sandwich – now costs around $3 in 2024.
Experts cited by FinanceBuzz mentioned that in dealing with the overall economic trend of rising labor costs, fast-food restaurants are also capitalizing on consumers’ willingness to continue patronizing their establishments despite higher prices. However, this delicate balance is reaching a critical point as the rising prices in the fast-food industry run the risk of alienating their core customer base.
The report from FinanceBuzz clearly caught the attention of McDonald’s, headquartered in Chicago. In May 2024, McDonald’s USA President Joe Erlinger published an open letter addressing the issue.
Erlinger wrote, “Inflationary pressures are impacting all sectors of the economy, including ours. Our franchisees (who own and operate over 95% of McDonald’s restaurants in the U.S.) are factoring in increased operating costs when setting menu prices. Still, they are working to minimize the impact of price increases.”
However, national polls show that Americans no longer see McDonald’s as the “most convenient, affordable dining destination for the whole family.”
During a recent quarterly earnings call in October, McDonald’s CEO Chris Kempczinski stated, “On our last call, we talked about significant slowdowns in the local dining space, and we saw traffic declines in several major markets. Consumers, especially lower-income consumers, are more frequently choosing to dine at home. This trend continued into the third quarter.”
Kempczinski further mentioned that “value” has always been a cornerstone of McDonald’s brand success, but “our value gap has narrowed.” This prompted the company to take “urgent action” by either lowering menu prices or expanding promotional activities to provide more value to consumers.
Fast-food chain restaurants are not the only dining establishments facing challenges in 2024. Operators of casual dining restaurants are also under pressure due to the decline in consumer dine-out behavior amidst inflation fears. In 2024, chain restaurants like Red Lobster, Buca di Beppo, and TGI Fridays applied for bankruptcy protection.
In February 2024, the National Restaurant Association (NRA) revealed in its report titled “2024 State of the Restaurant Industry” that 38% of its member restaurants did not make a profit in 2023. The report also stated that nearly all NRA members indicated that the rising costs of food and labor were the major factors leading to their financial difficulties.
The National Restaurant Association, based in Washington, D.C., did not immediately respond to requests for comments from Epoch Times reporters.
Also in February 2024, Revenue Management Solutions (RMS), a consulting company focusing on helping restaurants generate profits, released another report that raised concerns among restaurant operators.
The report titled “2024 Restaurant Dynamics: Changing Consumer Tastes” showed that Americans are dining out less frequently and spending less at restaurants.
The report also noted that the decline in foot traffic for fast-casual and full-service restaurants was much faster than that for quick-service restaurants. Consumers surveyed by RMS also indicated that they believed dining out was less cost-effective compared to eating at home.
Despite these trends, most large publicly traded chain restaurants had better financial performances this year compared to 2023.
According to recent filings with the U.S. Securities and Exchange Commission (SEC), operating profits for chain restaurant operators such as Darden Restaurants, Brinker International, and Texas Roadhouse had increased from the previous year.
Darden Restaurants, based in Orlando, Florida, and operating over two thousand restaurants in the U.S. and Canada, reported in its annual report released on July 19, 2024, that its net profits grew from approximately $982 million in the 2023 fiscal year to about $1.02 billion in the 2024 fiscal year. Their restaurant brands include Olive Garden, LongHorn Steakhouse, Cheddar’s Scratch Kitchen, Yard House, Ruth’s Chris Steak House, The Capital Grille, Seasons 52, Bahama Breeze, Eddie V’s Prime Seafood, and The Capital Burger.
According to the latest quarterly report released on September 27, 2024, this profit growth trend at Darden Restaurants was expected to continue into the 2025 fiscal year. The report indicated that the net profit of $194.5 million in the first quarter of the 2024 fiscal year for Darden Restaurants would increase to $207.2 million in the first quarter of the 2025 fiscal year.
Brinker International, operating around 1,600 restaurants under the brands Chili’s Grill & Bar and Maggiano’s Little Italy, reported an increase in net revenue from approximately $103 million in the 2023 fiscal year to about $155 million in the 2024 fiscal year in its latest filings with the SEC.
The Dallas-based company’s most recent earnings report on October 30, 2024, showed that net revenue for the first quarter of the 2024 fiscal year had increased significantly from $7.2 million in the same period of the previous year to $38.5 million.
During earnings calls, executives at Darden and Brinker credited their success to lower menu pricing.
At a fourth-quarter earnings call on June 20, 2023, Raj Vennam, Senior Vice President and Chief Financial Officer of Darden, said that due to “below-industry pricing,” the company had exceeded same-store traffic compared to other industry companies.
Brinker International CEO Kevin Hochman also noted that the improvement in performance at Chili’s restaurants was mainly attributed to initiatives such as investing more in staff, reducing the menu size by a quarter to focus on popular items, and promoting the cheapest dishes.
He highlighted a promotional deal priced at $10.99 – including fries and salsa, burger and fries, and a soft drink – and mentioned that this promotion made it difficult for competitors to match. Hochman also revealed that similar promotion measures were being implemented at Maggiano’s restaurants by Brinker.
John Peyton, CEO of Dine Brands, stated in the latest earnings call that sales at Applebee’s and IHOP had decreased this quarter compared to the same period last year. He mentioned that part of the reason was the significant increase in customer traffic during the buffet promotions held at Applebee’s and IHOP last year.
Peyton stated that promotions launched at IHOP and Applebee’s (with menu prices as low as $6 or $7) would soon show results.
Peyton said, “We will continue to focus on value for the rest of this year.”
The articles in translation were originally published by English Epoch Times.