With rapid inflation, many consumers are growing acutely aware of rising costs.
While it is easy to imagine that newfound price concerns could spell trouble for restaurants, which tend to offer a costlier food option than, say, cooking at home, the numbers have a different story to tell. It seems that United States consumers do not actually pull back their restaurant spending at times when inflation is on the rise.
Take, for instance, the year 1980. According to World Bank data, the inflation rate in the U.S. in 1980 reached a shocking 13.55%. Yet, in the same year, the share of disposable personal income that Americans spent on food away from home continued its upward trajectory, according to data from the U.S. Department of Agriculture’s Economic Research Institute’s Food Expenditure Series, even as the share spent on food at home decreased. Similarly, several years earlier in 1974, when the inflation rate hit 11.05%, the share of disposable income spent on food away from home also continued to rise.
Part of this counterintuitive trend may come down to the factors that both boost inflation and boost consumers’ willingness to spend. For instance, according to a Bureau of Labor Statistics (BLS) release from May 1981, average hourly compensation increased 10% in 1980. Similarly, a Monthly Labor Review from April 1975 revealed that the BLS calculated that the Hourly Earnings Index grew 9.4% in 1974.
As restaurants experienced in 2020 with each new round of stimulus checks, one of the first things that consumers do when they have more money to spend is go out to eat. For instance, back in March, Applebee’s largest franchisee, Flynn Restaurant Group, experienced a sales spike, which it attributed to “stimulus checks, enhanced unemployment and tax rebates.”
Read more: Applebee’s Gets ‘Incredible Bump’ From Stimulus Spend
Similarly, one year ago, restaurants including Church’s Chicken, Checker’s, Noodles & Co. and TGI Fridays, along with some McDonald’s owners, experienced stimulus-related sales bumps.
See more: Restaurants Report Revenue Hikes After $900 Billion Stimulus
In fact, even with today’s inflation rates, more than two-thirds of consumers engage with restaurants at least once a month, according to data from the January edition of PYMNTS’ Digital Divide series, “The Digital Divide Report: Minding The Loyalty Gap,” created in collaboration with Paytronix. Additionally, the study found that nearly one-quarter of consumers engage with restaurants once or twice a week, on top of the 8% that engage three times a week or more.
“I think it’s certainly increased optimism, but maybe a skeptical optimism, as we’re not fully back to where we were,” Alex Lee, vice president and general manager of Resy and the American Express Global Dining Network, told Karen Webster in a November interview in regard to the climate among restaurant operators. “We have to anticipate the next set of challenges to come.”
Read more: Dine-In Restaurant Recovery Hinges on Digital Experiences
