R&I Research: Low Consumer Confidence, Not Menu Pricing, Hurts Most

Foodservice operators say consumers’ fears about financial well-being and economy, not menu prices, are the biggest challenge now. Half the operators surveyed say they have lowered menu prices in order to build customer traffic.

By Staff -- Restaurants & Institutions, 4/10/2008

Foodservice operators say consumers’ fears about financial well-being and the economy, not menu prices, are the biggest challenge now. Half the operators surveyed say they have lowered menu prices in order to build customer traffic.

When R&I this month asked a sampling of operators which change would be most likely to increase their customer traffic over the next six months, 69.5% said higher consumer confidence and optimism about the economy would help the most.

Unfortunately, consumer confidence appears to be in short—and declining—supply. Columbus, Ohio-based BIGResearch this week released its latest Consumer Intentions & Actions Survey, which finds that 23% of consumers say they are confident or very confident about the chances for a strong economy during the next six months. That is less than half of the 46.5% who expressed confidence about the economy in April 2007.

Source: The Conference Board

In R&I’s study, the percentage of operations with average checks above $10 citing increased consumer confidence as the change that would most build traffic was 71.6%; among those with checks below $10, it was 66.7% Operators in the Northeast are the most concerned about consumers’ attitudes, with 80% saying more consumer optimism would best boost traffic.

Only 17.2% of operators say that lowering entrée prices on menus would most help bring back customers. Among chain-restaurant operators, 21.4% say lowering prices is the way to go, compared with only 15.1% of independents.

Lower gasoline prices would be a help according to 60.2% of respondents, and 53.3% say that an increase in consumer discretionary income would have the most positive effect.

Rising food costs make it difficult for foodservice operators to lower menu prices, and only 50% of the operators surveyed say they have done so. But 29.7% say they have cut prices for at least some dinner entrées, and 26.6% say they have done so for at least selected lunch-menu items.

Dinner and lunch price cuts have been initiated by larger percentages of operations with average checks less than $10 than of restaurants with $10+ checks.

Breakfast entrée prices have been trimmed by 10.9% of operators; desserts by 12.5%; appetizers by 11.7% and nonalcoholic-beverag prices by only 7%.