Study Reveals Menu-Pricing Strategies at Casual-Dining Restaurants
Recent research indicates that while menu prices at casual-dining restaurants are down slightly overall compared with 2008, prices for entrees, bar beverages, sides and desserts are on the rise.
-- Restaurants & Institutions, October 20, 2009
[PRESS RELEASE] BOSTON -- With all of the TV ads for discount entrées at casual-dining chains -- not to mention recent media coverage of price cuts -- consumers may not realize that it could be costing them more to dine out.
According to recent research from Boston-based pricing consultancy Intellaprice, which analyzes national prices for top restaurant-industry players, while prices are down 0.6% overall at casual-dining restaurants compared with 2008, they have increased in certain categories on the menu (the research focuses on regularly priced items, not those subject to special promotions). How customers order plays a large part in whether they actually see savings on the check.
"We hear a lot about the deals out there because that's what's being advertised," says Leslie Kerr, president of Intellaprice. "Two for $20 dinner deals and discount entrées are memorable, but the reality is there's a whole portfolio of menu items, and restaurants are strategic about managing prices in key categories."
Bar Beverage Prices Up Nearly 2%
Kerr notes that the continued economic downturn has impacted trends notably. "This year, food prices overall are down by .6% and bar-beverage prices are up nearly 2%. That's compared to our 2008 finding that food prices were up 2% overall and bar beverages were up 5% versus 2007."
Categories in which the average prices actually increased include dinner entrées at 2%, side dishes at 8% and desserts at 7%. On the flip side, two categories were down: appetizers decreased 2%, and add-ons -- items like cheese or additional proteins (bacon, for example) -- are down by 4%. "If you are a meat-and-potatoes eater who also likes dessert, chances are you could feel the sting," says Kerr. "But if you stick to the promoted deals, or if you tend to make appetizers your meal, then you're more likely to save some money."
Kerr explains that it's an age-old game of pricing management in hopes of driving profitability. "Restaurants feel pressure to take price increases somewhere; it seems as though they're trying to ease sticker shock for more noticeable, popular items and increasing prices in less-noticeable places on the menu."
2009 marks Intellaprice's third annual analysis of pricing trends in the casual-dining segment. The study covers top casual dining chains in 21 markets nationwide. Nearly 2,900 beverages and 13,000 food prices are included in the sample.
Other findings show that among chains surveyed, Atlanta boasts the most expensive dinner entrees, averaging $14.75, outpacing the New York, Chicago and Los Angeles metropolitan areas.
Drinks Up More Than Food
Drink prices increased more than food, which was also the case in the 2008 study. "We've all heard the anecdotes that bar business is impacted less in a down economy, and the findings bear this out," Kerr says. "This year, once again, the price change in bar beverages is significantly more than that for food. The most expensive drink in the study, a top-shelf margarita, was the only one whose price was unchanged. Sangria saw the highest average dollar increase, up $.28 to $6.07."
Relative drink price trends show continuity with last year's study. "Guests dining out in Oklahoma City may be pleased to know that market continues to serve the lowest-priced drinks versus other markets." New York offers more highly priced drinks, with Washington D.C. a close second. A domestic beer costs $3.22 on average in Oklahoma City, $4.13 in Washington D.C. and $4.15 in New York, on average.
-
This study reveals nothing new. Since when have chains NOT been strategic in their pricing? And thinking that some categories will be more or less impacted by the process than others according to commodity prices and such is amateurish.
As for being economical or 'showing people deals', that's asinine. Competing on price is 33% of what got the chains in the bad situation they find themselves in right now anyway. And 'Hope' isn't a plan.
With the recalibration that has gone on in the minds of consumers over the last 5 years, if you can't demonstrate value to the people who would put their butts in your seats, you won't be around long enough to see the next sunrise.
Jeffrey Summers - 11/2/2009 6:40:00 AM PST -
I like the fact that restaurants are highlighting items
that are reasonably priced. This shows the consumer that
they can walk into that building and not spend a fortune
if they don't have to. Sometimes, consumers don't know
the average price for an entree in that concept, and this
allows them to find out.
The whole point behind this is to get the consumer into
the establishment, show them what they are about, offer
them a deal and hope they will choose that location next
time they go out to eat.
Greg Valentine - 10/22/2009 9:46:00 AM PDT
No related content found.
