August 2, 2024
Eyes4Research
Whether you are a consumer or a business owner, everyone feels the pinch of persistently higher prices– from the grocery store to the gas pump. Restaurants, in particular, are grappling with skyrocketing costs for ingredients, labor, and utilities. This economic shift is reshaping how people choose to dine out (or whether to dine out), as they seek ways to enjoy a nice meal without breaking the bank.
Changing Consumer Spending Patterns
As prices climb, consumers are becoming more strategic about their dining choices. According to a recent survey by the National Restaurant Association, 60 percent of consumers report dining out less frequently due to rising costs. Younger consumers, particularly those aged 18-34, are the most likely to cut back, with 70 percent indicating that they have cut back on going out to eat.
Are Service Fees and Surcharges the New Normal?
To stay afloat amidst rising expenses, some restaurants, especially those in larger cities, are tacking on service fees or surcharges to customer bills. These fees help offset higher labor costs and supply chain issues without drastically hiking menu prices.
Many diners have pushed back on these fees, as part of a rising tide against tipping culture and what some diners view as a money grab on the part of restaurants. As a result, many restaurants have started experimenting with different pricing models, to educate consumers about their operational challenges, while looking out for their staff.
One example– Union Square Hospitality Group, led by renowned restauranteur Danny Meyer, has adopted a “hospitality included” model. The group aims to provide staff with a stable income while managing inflationary pressures by eliminating traditional tipping and raising menu prices to include service fees. A survey of diners at these restaurants found that most diners were supportive of this model, appreciating its transparency and consistency.
Chipotle Mexican Grill has introduced a small surcharge on online orders to cover the costs of digital operations and third-party delivery services. This strategy helps manage the increased demand for delivery without passing on steep price hikes to customers. Consumer feedback on this has been mixed, with some expressing understanding of the surcharge, and others stating that it deterred them from using online ordering.
Rethinking Tipping in an Inflationary World
The tipping culture in the U.S. is under renewed scrutiny as inflation affects both diners’ and workers’ wallets. A recent study by One Fair Wage found that 68 percent of tipped workers struggle to make ends meet, while 72 percent of consumers believe that restaurant workers should be paid a fair wage regardless of tips.
The One Fair Wage campaign is pushing to end the subminimum wage for tipped workers, advocating for fair wages that are not dependent on customer generosity. This movement is gaining momentum, with some states and cities considering legislation to raise minimum wages for all workers. In areas where this legislation has been proposed, it has been found that most of the general public supports the initiative.
The Power of Market Research to Understand Consumer Behavior
Understanding consumer behavior through research is essential for the restaurant industry. By activating insights about spending habits, pricing attitudes, and dining preferences, restaurants can make informed decisions to attract and retain customers.
Research has shown that most diners value transparency in pricing and ethical labor practices. Restaurants that communicate their pricing strategies and emphasize fair wages can build stronger customer loyalty and trust. Ethically-aware consumers are more likely to support restaurants they perceive as treating their staff well.
How Research Can Help Restaurants Adapt Menus and Marketing
Using research, restaurants can tweak their menus and marketing strategies to align with what consumers want. Offering value menus, special promotions, or highlighting budget-friendly options can appeal to cost-conscious diners without compromising on quality. Many consumers look for deals and discounts when choosing where to dine.
Inflation is reshaping the restaurant industry, influencing how consumers spend and how restaurants operate. By understanding and adapting to these changes, and leveraging research, restaurants can navigate these challenges, adjust their business models, and continue to thrive.
Staying ahead of these trends not only helps maintain profitability but also ensures that restaurants meet customer expectations, better positioning themselves for long-term success.
Read more about the restaurant industry and consumer behavior on the Eyes4Research blog. Eyes4Research also has everything restaurants need to build trust with their customers by collecting high-quality insights from consumers. Our panels are comprised of B2B, B2C, and specialty audiences ready to participate in your next research project. Learn more about our specialty panels here.