Restaurants Step up Discounting to Maintain Loyalty as Inflation Eases

Restaurants have raised prices considerably in recent years, and they are finding that to get their customers back, they must increase their discounting efforts, according to Chicken Salad Chick President and CEO Scott Deviney.

Deviney, who helms the fast-casual chain, which has more than 225 restaurants across 17 states, explained in an interview with PYMNTS that he has seen a rapid shift across the industry from raising prices to offering deals.

“We were all hit by inflation,” he said. “No one was immune from it. So, we were all taking price, and I don’t think anybody could take price quickly enough. When you fast forward to today, the price increases have eroded some transactions, which they always do. I think what you’re seeing now is the is the knee jerk the other way of discounting, to try to make up for the lost transactions.”

Deviney added that, as inflationary pressures ease and some commodity prices fall, restaurants do not want to go backward, lowering prices, but they can “afford to do some discounting” to bring back those customers who were put off by the increases.

PYMNTS research found that the current inflationary environment has sent demand for restaurant discounts skyrocketing. Specifically, data from the study “Connected Dining: Consumers Like the Taste of Discount Meals,” revealed that discount redemption on restaurant meals jumped 86% from March 2022 to February 2023. That is, the share of consumers who reported having used a discount on their most recent purchase from a restaurant rose from 14% to 26% in that time.

Overall, prices have risen significantly in the past couple of years. The latest Consumer Price Index (CPI) data from the Bureau of Labor Statistics (BLS) revealed that, in May, restaurant prices rose 6.7% year over year on top of a 7.4% increase the previous year.

While food and commodities cost challenges may be easing, Deviney noted that labor inflation remains a top-of-mind issue for operators.

“Labor pressures are still there,” he said. “We’re still having tremendous labor tightening, and that’s causing the wage inflation that has not really subsided over the last couple of years. But it’s stable. It’s not growing at the same rate.”

The latest edition of PYMNTS’ “B2B and Digital Payments Tracker®,” a collaboration with American Express, “Inflation Puts Technology on the Menu for Restaurants,” cited findings that 78% of restaurant operators do not have enough staff to support customer demand. About one in three restaurants have decreased their level of service as a result of staffing shortages.

With costs as an ongoing issue, Deviney said smart back-of-house technologies that help with price forecasting and other analytics can be key to helping restaurants navigate these issues.

“The technology piece will help [with pricing],” he said, “because we will be able to get data quickly to make decisions, and without some of that data, and the ability to do [access it] very quickly, we might have been caught behind the eight ball.”

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