As restaurants continue to grapple with the balance between rising ingredient and commodities costs and their customers’ menu price sensitivity, The Restaurant Group plc, owner of London-based multinational restaurant chain Wagamama among other brands, is looking to rein in price increases to keep customers coming back.
The company emphasized in a presentation Thursday (Sept. 8) discussing the company’s 2022 interim financial results a focus on keeping prices relatively low, as the Financial Times highlighted.
“The one thing I think we’ve been very disciplined on is, we have not passed on all of the cost pressures to customers,” the company’s CEO Andy Hornby told analysts of the company’s success relative to competitors. “So, whilst clearly there have been price increases as you would expect in this environment, when you look at the scale of utility cost increases and food input cost increases, … I would be 99% certain that the outperformance has been more volume-driven and price-driven versus the competition.”
Price is top of mind for many restaurant brands right now. PYMNTS’ research suggests that rising food inflation may have consumers pulling back on restaurant spending; the usual summer dining rush did not last very long this year, with consumers once again reigning their restaurant purchasing in as early as July.
Specifically, PYMNTS’ study “Digital Economy Payments: Consumers Buy Into Food Bargains,” found that, in July, 70% of consumers reported having made a restaurant purchase in the previous 30 days. Additionally, the study, which draws from a survey of a census-balanced panel of nearly 2,700 U.S. consumers in July about how they are saving and spending their dollars as the economy faces continuing uncertainty, noted that this share was down from 73% that reported doing so in May and 72% in June, closer to the 69% that did so in March and April.
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Consequently, restaurant companies that have the resources to do so are being deliberate about keeping prices below the competition.
“We will continue to leverage our scale and our superior financial position to make long-term investments in our business,” Rick Cardenas, CEO of Olive Garden parent company Darden Restaurants, told analysts on a call in June. “We will continue to invest in our brands’ value propositions by underpricing inflation over the long-term. This is the biggest investment we make every year.”
Meanwhile, other brands are taking a different tack, relying on their customers’ loyalty to maintain sales volumes while raising prices. Take, for instance, fast-casual giant Chipotle Mexican Grill, which has been raising menu prices significantly, adding a 4% increase in August.
“I really believe the value proposition what we sell today is our strongest proposition. We looked really hard at this,” Chipotle CEO Brian Niccol told analysts on a call in July. When you look at a chicken burrito, steak burrito and you compare that to your alternatives, the value is there. … We execute great accuracy and being on time and we execute great throughput. That’s our winning formula.”