Rising Food Prices Have Restaurants Seeking Other Revenue Streams

This week in restaurant news, Chuck E. Cheese looks to boost its margins by opening a new revenue stream, the inflation gap between foodservice and grocery grows wider and Uber Eats bows out of Italy.

The Bureau of Labor Statistics (BLS) Consumer Price Index (CPI) data for May, released Tuesday (June 13), revealed that grocery inflation has slowed significantly, down to 5.8% year over year. For context, at its peak last August, grocery inflation was up to 13.5% year over year.

Yet, as grocery inflation slows, the gap between restaurant inflation and grocery inflation widens. With restaurant prices up 8.3% year over year, 43% higher than grocery inflation, eateries risk losing consumers to more budget-friendly food-at-home options.

After all, even when grocery inflation was way ahead of restaurant inflation, consumers still estimated restaurant inflation to be higher. Now that the balance has shifted, restaurants are left in a trickier position than ever when it comes to maintaining consumer loyalty.

In November, PYMNTS research showed that roughly a third of consumers were making purchases from restaurants less frequently due to inflation. Plus, the study found, a share ranging from 81% to 87% of consumers (depending on income bracket) reported having made changes to their dining habits to manage inflationary pressures.

These trends may bode well for affordability-focused brands such as McDonald’s, but full-service chains like Cracker Barrel are seeing traffic take a hit.

Chuck E. Cheese Supplements Revenue by Licensing out Characters

As restaurant brands note the impacts of inflation on diner’s behavior, many are looking for additional ways to drive revenue and boost their margins, with many, from White Castle to Red Lobster, unveiling new lines of packaged grocery products.

Restaurant and entertainment chain Chuck E. Cheese, for its part, is looking to capitalize on its well-known character designs by licensing them out. The brand announced Monday (June 12) the launch of its licensing program, partnering with makers of clothing, toys, packaged foods and other products.

“We are incredibly excited to embark on this new chapter for Chuck E. Cheese,” Melissa McLeanas, vice president of the company’s new global media, licensing and entertainment division, said in a statement. “We have carefully selected a diverse range of partners to collaborate on this initiative, ensuring that every product and experience captures the essence of the Chuck E. Cheese and friends universe and appeals to our wide-ranging audience.”

Uber Eats Says Arrivederci to Italy

As restaurant delivery services around the world compete to establish their global presences, navigating complex and ever-changing local food delivery landscapes that differ significantly from market to market, Uber Eats is bowing out of Italy, Reuters reported Thursday (June 15).

The decision was “in line with our efforts to focus on markets where we have opportunities for sustainable growth,” an Uber spokesperson told the outlet. The delivery service initially launched in the country back in 2016.

In the last couple of years, many aggregators have pulled out of international markets, finding the competitive landscape too crowded to make the costs of operating in those areas worthwhile. Deliveroo pulled out of the Netherlands in October. DoorDash’s DashMart dark store rapid delivery arm shut down in Australia in April, about four months after its launch in the country. Delivery Hero sold $150 million of its stake in Latin American delivery firm Rappi. Uber Eats left Brazil in March.

The news comes as inflation has U.S. restaurant customers pulling back on delivery. Research from PYMNTS’ study “Connected Dining: Rising Costs Push Consumers Toward Pickup” revealed that 48% of all consumers have been more likely to pick up their restaurant orders themselves rather than have them delivered due to inflation.