New Data Shows How Restaurant Guests Really Feel About Price Hikes
A new survey from the restaurant software company Toast offers some interesting insight into how the dining public feels about eating out. A headline statistic from the blind poll of 850 respondents addresses prices. When asked if recent price increases at restaurants were justified because of inflation and other economic forces, 90% of respondents said that price increases were at least somewhat justified, with 41% of people responding that they felt the price increases were fully justified. That left only 10% of people claiming they were completely unjustified.
As inflation continues to impact the economy, food prices are steadily climbing and will remain high even after inflation returns to a normal range. Even though restaurants are buying their ingredients wholesale, their budget is still affected by these price increases, and pushing up the cost of a meal is one way to keep their doors from closing for good. As the survey indicates, most people understand this at a general level.
It is interesting to note that the plurality of respondents (49%) felt price increases were "somewhat justified." It's a good example of how ambiguous survey results can be since we don't know what exactly people mean by this. This could indicate that people are confused about how pricing works, they may think that restaurants already have a wide enough margin, or they could just be resentful of inflationary pressures in general and expressing dissatisfaction.
A messy economy keeps people at home
As people look for ways to tighten their budgets, discretionary spending on restaurants is often the first to go. We saw this play out last year when casual dining restaurants took a sales hit. If restaurants want to attract customers during this economic uncertainty, they may have to get creative about how they are advertising. If your restaurant looks like a good deal and the quality is high, it may be enough to overcome your new competitor — grocery stores.
The situation is muddied because even if people understand that inflation is high and affecting a meal's price, that doesn't mean everyone grasps every subtle economic force at play. Another insight the survey was able to pull was how much people thought inflation was responsible for restaurant prices. Forty-one percent of respondents thought that restaurant prices had increased by 10% to 20% over the past year, but according to The Bureau of Labor Statistics Consumer Price Index, they've only gone up by 4.2% which is slightly above the general inflation rate at 3.5%.
Even if inflation has slowed this past year, it's still increasing relative to the previous year. In August of 2022, the inflation rate of food overall peaked at a whopping 11.4%. So even if the public's conception is lagging behind statistics, they're still noticing the compounding rise in price. Fast food prices rose 29% in four years, so it's not as if people are wildly off the mark.