It’s been a year of shifting priorities as inflation grips the US economy.
For those in the food industry, it’s a battle to manage prices while facing limited supplies and labor. Consumers, however, have had to change their priorities in how they spend money, as well as how they earn it.
Most American workers have changed their spending habits as a result of inflation, which affects how they view work. A recent survey by Bluecrew found that nearly 60% had sought new or additional roles in the past year. Half of the respondents try to find seasonal jobs during 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% were looking for other jobs, and interest in concert work has increased, CBS News reports.
With so many individuals keeping a watchful eye on their income and spending, what is considered value versus luxury is changing. Not only is going out for food seen as more luxurious, consumers want to forego any unnecessary food consumption unless they see greater value in the product.
So what is value anyway? The answer may change based on demographics, but if restaurants can avoid certain pitfalls while cultivating repeat business, they will emerge from this economic period relatively unscathed.
According to Revenue Management Solutions, Generation Z and Millennials represent a key consumer base for restaurants. Overall, younger consumers have spent more at restaurants this year, are increasingly using carpools, and are driving the majority of delivery orders. The data shows they are slightly more concerned about poor service and less affected by higher prices, but not all consumers agree.
Many companies have raised prices to offset supply chain costs or changed their menus, but this can be risky for restaurants. “Reduced inflation,” or serving smaller items for the same price, is one of the main reasons consumers generally devalue restaurants. The lack of portion sizes is enough to drive many customers to competitors who keep the menu items consistent even if their prices go up.
QSR Magazine reports that more than 75% of consumers said they notice when restaurants and retailers use this tactic. To avoid raising prices or reducing menus, some restaurant owners are looking for 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 his own spices and has even spent hours carving a Costco roast during the carne asada shortage, according to Eater Austin.
Another alternative to drastic menu and price changes is for restaurants to adopt dynamic pricing models that can rely on data to make regular price adjustments that won’t be as intimidating to consumers. A regional Layne’s Chicken Fingers franchise has begun managing more base costs, food and labor, along with a greater focus on productivity rather than percentage targets, QSR Magazine reports.
This allows the fried food chain to offset higher production costs by looking to other areas for potential savings while focusing on customer satisfaction.
Carefully reducing operating costs is one strategy, but there are also ways restaurants can create perceived value that attracts frugal customers. Many consumers derive value from convenience. Among fast-food restaurants, the trend towards drive-thru service and online ordering has been a recipe for success with customers looking for quick and easy meals.
Offering attractive combo deals and a robust value menu are also effective ways to combat price gouging. More than ever, customers are looking for fast food promotions that can save them money, as well as alternative menus that are inexpensive yet satisfying.
While the economy continues its journey, the hospitality industry is still in a precarious position, but not an unmanageable one. Restaurants that can strike that perfect balance between competitive pricing and customer satisfaction will be in the best position as economic conditions eventually improve.