It has been a year of shifting priorities, with inflation holding the US economy firmly in place.
For those in the food industry, it’s a struggle to manage prices while supplies and labor are limited. Consumers, however, have had to prioritize how they spend money, as well as how they earn it.
Most American workers have changed their spending habits due to inflation, which affects how they view their work. A recent survey by Bluecrew showed that almost 60% were looking for new or additional roles in the past year. Half of respondents are looking to pick up seasonal jobs around the holidays.
Meanwhile, a recent study by Qualtrics found that about half of Americans are considering a second job because of high inflation. A survey of 1,000 adults found that 38 percent had looked for a second job, sparking interest in gig work, CBS News reported.
With so many individuals keeping a close eye on their income and expenses, what is considered a value and a luxury changes. Not only is going out to eat more luxurious, but consumers want to cut down on unnecessary food spending if they don’t see more value in the product.
So what is value, anyway? The answer may vary depending on demographics, but if restaurants can avoid certain pitfalls while cultivating repeat business, they’ll manage to come out of this economic period relatively unscathed.
According to Revenue Management Solutions, Gen Z and Millennials are the core consumer base for restaurants. Overall, younger consumers have spent more at restaurants this year, are increasingly using the drive-thru, and are driving the majority of delivery orders. The data suggests they are somewhat more concerned with poor service and less affected by high prices, but not all consumers agree.
Many companies have raised prices to offset supply chain costs, or made changes to their menus, but this can be risky for restaurants. “Shrinkflation” or serving smaller sized items at the same price is one of the main reasons why consumers value restaurants in general. Shortening portion sizes is enough to drive many customers to competitors who keep menu items consistent despite raising prices.
QSR magazine reports that 75% of consumers say they notice when restaurants and retailers use the tactic. To avoid raising prices or shrinking menus, some restaurant owners turn to other areas to cut costs, such as finding alternative suppliers or preparing ingredients in-house. At Austin taqueria Granny’s Tacos, owner Rey Hernandez scours wholesale markets for deals, mixes her own seasonings, and has spent hours carving Costco chuck roast into measly carne asada, according to Eater Austin.
Another alternative to dealing with changes in menu items and prices is for restaurants to adopt dynamic pricing models that can be based on data to make regular price adjustments that won’t be as overwhelming to consumers. Regional franchise Layne’s Chicken Fingers first began managing costs, food and labor more by focusing more on productivity than percentage targets, according to QSR magazine.
This allows the fried food chain to offset higher production costs by focusing on other areas, focusing on customer satisfaction.
Careful reduction in operating expenses is one strategy, but there are also ways in which restaurants can perceive value to attract frugal customers. Many consumers derive value from convenience. Among fast-food restaurants, leaning toward drive-thru service and online ordering has been a recipe for success with customers looking for quick, easy meals.
Offering attractive combo deals and a strong value menu are effective ways to combat price hikes. Now more than ever, customers are looking for fast food promotions that can save them money, as well as affordable yet satisfying menu alternatives.
As the economy continues on its way, the food industry remains in a precarious, but not unmanageable, state. Restaurants that can strike the perfect balance between competitive pricing and customer satisfaction will eventually be in the best position when the economic situation improves.