#CasualDining #FastFoodPriceHike #ConsumerShift
Fast-food customers are shifting to casual-dining chains, Darden Restaurants CEO Rick Cardenas revealed in a recent earnings call. This trend is driven by rising fast-food prices, which have led disgruntled customers to seek more affordable options. Competitors like Brinker International, the owner of Chili's, and Dine Brands, the parent company of Applebee's, have capitalized on this shift, rekindling a rivalry with fast-food establishments.
Chili's launched an advertising campaign targeting the high prices of fast-food burgers. Dine Brands CEO John Peyton shared that Applebee's has focused on deals to lure fast-food patrons. Industry data indicates a shift from quick-service restaurants (QSRs) to casual dining, with full-service menu prices increasing by 3.5% over the past year, compared to a 4.5% rise for limited-service eateries, according to Department of Labor data. The overall consumer price index rose 3.3% during the same period.
Consumers have felt the burden of price hikes for over two years, even in the fast-food sector, which usually thrives during tough economic conditions due to consumers opting for cheaper meals. However, full-service restaurants and grocers have emphasized their value proposition, offering either lower prices or superior experiences and quality compared to fast-food options.
McDonald's, in particular, has faced criticism from customers, social media users, and even House Republicans over its price increases. In response, the company's U.S. president, Joe Erlinger, defended the price increases, stating that they have only risen 40% since 2019. To cater to price-conscious diners, McDonald's introduced a new $5 value meal and offered free French fries on Fridays for mobile app customers purchasing any item.
Darden, on the other hand, has employed a distinct strategy to attract customers. The company has relied on television advertising and maintained lower overall pricing than inflation to remain competitive. In its fiscal fourth quarter, Darden reported flat same-store sales growth and weaker-than-expected revenue, although its earnings surpassed Wall Street's estimates.
Despite dealing with a consistently weaker consumer environment and heightened discounting and marketing pressure from competitors, Darden executives expressed optimism, stating that its restaurants are outperforming the broader casual-dining segment. Shares of $DRI rose by more than 1% in morning trading on Thursday, with the company's stock having declined 6% year-to-date due to concerns about the consumer environment.
Original Article: https://www.cnbc.com/2024/06/20/inflation-fast-food-diners-switch-to-casual-chains-darden-ceo-says.html
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