Restaurants Push Promotions as Diners Lose Appetite for High Prices

Consumers are spending less at restaurants as menu prices remain high. 

And as Seeking Alpha reported Saturday (June 22), it’s a situation that’s left some eateries embracing creative promotions to entice their customers.

The report focuses on three brands: Chipotle, Starbucks and McDonald’s, the last of which will launch a monthlong promotion this week offering diners four menu items for $5.

Seeking Alpha points to findings by Bank of America arguing that the $5 menu deal addresses the lack of a national value menu, though the bank cautioned that broader menu pricing might still need to be adjusted lower.

Meanwhile, Starbucks has increasingly been offering its beverages at steep discounts in a series of recent pop-up promotions, leading to an uptick in traffic but also headaches for workers dealing with long lines and busy stores. Starbucks Chief Financial Officer Rachel Ruggeri said the company has been adding staff to address this demand and speeding up service via new equipment and workflows.

As for Chipotle, the fast-casual brand has been combating complaints on social media about its portion sizes, with CEO Brian Niccol recording a TikTok clip to let customers know how to signal to workers when they want a larger helping.

Still, complaints about portion size don’t seem to have had much of an effect on traffic, the report said, pointing to data from Restaurant Insight Monitor which showed that “stated visitation intent” from consumers has been moving higher for Chipotle.

Other restaurants are seeing consumers pull back, such as the Darden chain — owner of Olive Garden — which reported a decline in same-store sales last week at its fine dining locations amid consumers’ concerns about inflation and the labor market.

CEO Rick Cardenas said during an earnings call that those concerns are greatest among consumers with incomes below the median household income of $75,000 and especially among those below $50,000, with the company’s transactions with these consumers lower in the fourth quarter than they were a year earlier.

Same-store sales at the company’s fine dining restaurants were down 2.6%, while those at Olive Garden declined 1.5%, with other businesses down 1.1%. LongHorn Steakhouse was the company’s only brand that enjoyed a gain, with sales climbing 4%.

Meanwhile, recent data from the U.S. Commerce Department showed consumers cutting back on their food budgets, with spending at grocery stores and restaurants both declining 0.4% month over month in May.

That’s also the same amount that restaurant prices increased in May, according to the most recent Consumer Price Index.