With some in the industry considering the continuing rise in menu prices at the core of consumer pullback, many were happy to see the recently released Bureau of Labor Statistics CPI report. While it showed restaurants still overshadowing grocery stores in terms of price increases, it also demonstrated a slowing.
The food-away-from-home index rose 0.2% in July, the same rate as June. Limited-service restaurants showed the greatest increases with 0.3%, while full-service restaurants rose by 0.1%. Comparatively, supermarket prices were up by 0.1%.
According to Nation’s Restaurant News, this represents the 17th month in a row that increases in restaurant prices rose above food-at-home. It also didn’t do much to alleviate the gap between the two, which remains at about 300 basis points. The historical average is 60 basis points.
What does this mean for the restaurant industry?
According to Black Box Intelligence
The data and insights provider revealed that overall restaurant sales plateaued in May and contracted into the negatives in June. The reason? Consumer spending slowdown. In one survey, about 23% of consumers reported trading down and purchasing more of their food at grocery stores.
Their Q3 restaurant industry recap revealed the following:
- The inflation rate is at its lowest level in three years.
- Fixed cost inflation on items like shelter and food remains high.
- The unemployment rate is at its highest since November 2021.
- Wage growth is outpacing inflation.
- Personal savings rates have dropped from 4.8% last year to 3.9% currently.
What does all that mean? While there’s money, people don’t particularly want to spend it. They do, however, love restaurants, and much of the money they spend on food and beverages goes to dining out.
The Experience
According to Black Box Intelligence, the number one thing restaurants can do to drive customers back into their open arms is to provide them with a phenomenal experience. Sound familiar?
Their data revealed that the higher the star ratings on Google Review, the greater the weekly sales. Why Google? When Blackbox analyzed more than 1.4 million reviews from Google, Facebook, TripAdvisor, and Yelp, they found that Google was the most important review platform. That’s predominantly because, when you pull up a ‘’restaurant near me,” you’ll find the Google platform with the number of ratings revealed. These ratings are one of the critical ingredients in a restaurant’s success.
So, what was Blackbox’s conclusion regarding the state of the industry? While consumers are cautious about spending, they will part with their hard-earned dollars for the right experience.
Restaurants Doing It Right
NRN and Technomic joined forces to identify the top chains with less than 100 units that demonstrated the most exciting growth in the industry. Here are a few that made the grade:
- Angry Crab Shack: Owned by former NFL player Ron Lou, this brand’s signature menu item is a seafood boil. Unique, particularly in the deserts of Mesa, AZ., where it was founded, there are currently 23 units.
- Another Broken Egg Café: Another brand in the ever-popular breakfast-lunch segment, NRN reports that it opened 15 locations last year alone and grew sales by almost 20%.
- Barrio Tacos: Really, with a tagline like “tacos + tequila + whiskey,” how could it go wrong? Founded in Tremont, Ohio, it’s reached 25 locations and brought in $103 million in sales in 2023, a 35% increase over 2022.
- Bartaco: This casual-dining Mexican restaurant is one of the fastest-growing in this segment.
- Bibibop Asian Grill: Focusing on two of the more important traits in 2024: health and affordability, the brand provides an environment where guests create their own bowls. In 2017, NRN noted them as a hot concept with 20 locations. Today, that number stands at 51.
Of course, we’ve only scratched the surface of the brands to lay claim to thriving emerging restaurant chains under 100. It’s good to see such tremendous growth at a time of uncertainty.
At Emerging Concepts, we work with leading restaurant and entertainment concepts, benchmarking growth and helping them expand their brands across the country. Through the use of data, such as a Market Potential Map and a proprietary Deep Learning Model, we help restaurants determine their market priorities. To learn more or to schedule a consultation, contact Emerging Concepts.
