Restaurant sales are increasing. But eating out is on the decline – CNN | CarTailz

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Chain restaurants reported increasing sales in the third quarter. But more sales doesn’t mean more customers.

In fact, industry watchers are noting that traffic to restaurants has declined in recent months. That’s because many are cutting back on dining out and eating out more often as inflation weighs on consumer budgets.

“You see this dichotomy where you see solid sales, but at the end of the day it’s mostly… because of price increases,” said RJ Hottovy, head of analytical research at, which uses mobile location data to estimate visits.

Many restaurant chains “overpriced their consumers,” he said. “You have to find ways to bring people back in.”

Restaurants have increased menu prices in recent years, giving them a boost in sales because each bill is larger, even if fewer customers are buying their food or people are coming in less often.

The price increases were not enough to discourage consumers from eating out earlier this year. According to data from, footfall at fast-food, fast-casual, and full-service restaurants where someone takes your order at a table increased between 20% and 31% year-over-year in January.

But in August, as consumers grappled with months of high inflation, every category was down. For the month, traffic at fast-food restaurants decreased by 1.2%, at fast-casual restaurants by 1.7%, and at full-service restaurants by 4.7%. Fast food traffic recovered slightly in September and October, but fast ad hoc traffic and full service traffic remained negative.

“We’re seeing a noticeable impact on visitation trends due to inflation,” Hottovy said.

Consider the situation at Chili. Sales at the chain’s locations open 18 months or more rose 3.8% in the three months ended Sept. 28, Chili’s parent company Brinker Internationa (EAT) reported in November — an increase attributed to higher prices.

The traffic, on the other hand, decreased 6.6% for the quarter, and that’s not expected to change anytime soon. The company expects foot traffic to decline in the mid-single digits for the remainder of the fiscal year.

“We believe that some diners are responding to the tougher economic environment with fewer restaurant visits,” said Joe Taylor, Brinker’s chief financial officer, during an analyst call discussing the results. He acknowledged that “we’re likely to see some traffic loss since it’s the discounting side of the equation.”

Some consumers may switch to cheaper restaurants. But many find that even though food prices are also increasing, eating out is still cheaper than eating out.

Groceries are getting more and more expensive across the board not only in restaurants. In fact, food prices are rising faster than menu prices. According to data from the Bureau of Labor Statistics, food prices rose 12.4% in the year to October, unadjusted for seasonal variations. Restaurant prices increased by 8.6%.

But foods in general are cheaper than restaurant food. And as consumers try to stretch their budgets, demand for groceries remains high.

Grocery sales by volume “have remained fairly stable,” said KK Davey, president of thought leadership at research firms IRI and NPD.

Wendy's CEO said folks

“Restaurant meals cost three or four times more” than homemade, Davey said. Because of the cost discrepancy and the increase in menu prices, “people aren’t eating out as much,” he said. “Inflation is clearly driving this behavior, particularly among those who are stretching their budgets.”

The drop in traffic across the industry “really has to do with the state of consumers,” Wendy’s CEO Todd Penegor said during an analyst call in November discussing the company’s third-quarter results.

Customers “shifted to more at-home meals during the pandemic. It kind of got stuck there as consumers were a little more tense,” he said.

“So what you’re seeing right now is a little less footfall across the industry, which is putting a little pressure on traffic.”

Chili’s found its traffic dropped as it pulled discounts. But more deals doesn’t necessarily mean more traffic.

“Traffic to [quick-service restaurants] Supply at most deals declined 1% year over year in the quarter, with the same decline reflected in [those] Restaurants,” according to a November report by the NPD.

In October, a promotion went so well that Hottovy noted that it boosted restaurant traffic in the fast food space overall, turning it from negative to positive, and it had nothing to do with discounts: McDonald’s Cactus Plant Flea Market Box, also known as the Adult Happy Meal.

“Earlier this month, through a collaboration with Cactus Plant Flea Market in the US, we tapped into one of the most nostalgic McDonald’s (MCD) experiences of where we enjoyed a Happy Meal as a child and repackaged it to be relevant for adult fans make. McDonald’s (MCD) CEO Chris Kemczinski said during an analyst call in October of the chain’s third-quarter results.

“It’s fair to say that this sentimental experience was a success as 50% of our range of collectibles were sold in the first four days of the promotion,” he said. “These increased visits also resulted in the highest-ever weekly digital transactions in US business.”

As other companies follow McDonald’s playbook, expect more nostalgic offerings.

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