Here’s why restaurant businesses are struggling worldwide

Average spending per order and frequency of customer visits is altering
An undated image of a restauramt. — Piabay
An undated image of a restauramt. — Piabay 

Restaurants worldwide are facing tough times. From rising food costs to labour shortages, many eateries are battling to stay afloat. This struggle could impact diners as restaurants adapt, potentially raising prices or reducing menus.

Amidst common challenges, chains faced hurdles that determined their fate — ranging from customer preferences to economic dynamics. Gadinsider explores the three pivotal trends that have illuminated this divide, shedding light on the factors that led some to soar while others faltered.

Trend 1 — Restaurant traffic: Twin metrics of success

The heartbeat of restaurant performance lies in two key metrics: the average spending per order and the frequency of customer visits. As menu prices escalate, consumers are exhibiting cautious spending behaviour. In response, restaurant chains are increasingly reliant on foot traffic to buoy their same-store sales.

Notably, this trend holds a magnifying glass to the industry's vitality, catching the attention of Wall Street and investors. The likes of McDonald’s, Chipotle, Texas Roadhouse, and Wingstop have emerged as front-runners in this battle, reporting growth in US traffic during the latest quarter.

In contrast, Restaurant Brands International experienced a decline in traffic for its chains like Popeyes, Burger King, and Firehouse Subs. Wendy’s, another contender, witnessed a 1% drop in domestic transactions during the second quarter. As we look ahead, the spectre of an even steeper traffic decline looms for the latter half of the year, casting shadows on stock performance.

Trend 2 — Perception of value in flux

As the tide of inflation recedes and economists whisper about a "soft landing," the persistent quest for value continues unabated among consumers. The realm of fast food has felt this impact, witnessing patrons migrating from pricier fast-casual establishments to more budget-friendly burgers and taco havens.

Yet, the nuanced perception of value presents a diverse landscape. For instance, McDonald's finds favour among those earning less than $100,000, while Wendy's noted a pullback in spending from those with incomes below $75,000. Wingstop’s value score experienced a positive uptick, coinciding with a decline in chicken wing prices.

Chipotle also succeeded in enhancing the value proposition for its burrito bowls, attracting the return of low-income patrons. However, these customers are now visiting less frequently due to accelerating inflation. With these dynamics at play, the industry dance of gauging value perceptions is ever-enthralling.

Trend 3 — Promotions odyssey

In the pursuit of value supremacy, promotions have emerged as potent tools in restaurant marketing. Discounted combos and limited-time menu offerings have shared the spotlight, shaping sales trajectories. McDonald’s showcased a resounding success story with its Grimace Birthday Meal, riding nostalgia and driving traffic with innovative items.

Conversely, Papa John’s gambled on the allure of Doritos Cool Ranch-flavored Papadias, kindling social media excitement and restaurant traffic. However, the Papadias couldn't outshine the chain’s previous blockbuster — a pepperoni-stuffed crust pizza. The battle of promotions unveils intriguing dynamics, where innovative menu offerings meet customers' ever-evolving preferences.