Casual-dining chains have raised prices on several menu items this year even as they continue to advertise deals, according to a new study.
The Boston-based consultancy Intellaprice found higher prices for entrées, kids' items, appetizers and sides in its latest casual-dining price survey, which polled prices for 26,000 food and beverage items at brands in 21 markets in August and September.
“In a recession, when restaurant customers are perceived to be worried about high prices, you might guess that price increases on entrées would be minimal," said Leslie Kerr, president and founder of Intellaprice LLC. "And you’d be wrong."
The average price for lunch entrées at casual-dining concepts rose 13 percent this year, from $7.14 to $8.07, Intellaprice found, while dinner entrées rose 6 percent, from $12.98 to $13.70.
Kerr said casual-dining brands appeared to be using a classic loss-leader strategy by promoting deep discounts designed to build guest traffic with the expectations that some customers would buy drinks, sides, desserts or higher-margin entrées.
“At casual-dining chains, the major players are advertising great deals such as dinner for two for $20 to pull in customers, but once folks show up, they’re hoping there’s a subset who decide, ‘I don’t need dessert, I’ll just get a regular entrée,’” Kerr explained. “Your higher-value customer may well be spending less than most of the others at the table, and might even feel virtuous. In the meantime, the spike in her entrée price is less noticeable.”
In addition to entrée price increases, Kerr said the survey found price hikes for side items and appetizers. Decreases were noted in prices for desserts and such add-ons as cheese, guacamole, bacon, salad, soup or premium items.
A breakdown of the price changes tracked by Intellaprice:
Casual-dining chains and other restaurants may have more room to raise prices next year, as the rate of inflation for food at home rises, analyst Jeff Omohundro of Wells Fargo Securities wrote in a report last month. (EARLIER: Restaurants to gain pricing power in 2011)
Intellaprice found prices also rose for alcoholic beverages, but less so than many food prices, with bar increases averaging 3 percent.
Kerr said the average price of cocktail rose 19 cents to $6.05 in 2010. “This year, increases of more than 20 cents on cocktails are rare,” she said, with one exception: Sangria prices were up on average 46 cents.
The average price for domestic draft beers fell 8 cents from the previous year and imported drafts were down 11 cents, Intellaprice found. Bottled domestic beer was up 4 cents and bottled imported beer was up 8 cents.
“Traditionally, a high portion of restaurants’ profits come from the bar, and beer prices show the most conservative change,” Kerr said.
Among regional differences, Intellaprice found casual-dining chains in New York had the most expensive dinner entrées this year, at an average price of $15.01. Los Angeles casual-dining restaurants, meanwhile, had the highest average prices for lunch entrées at $9.27.
This is the fourth year Intellaprice has conducted the casual-dining price survey.
Contact Ron Ruggless at [email protected].
CORRECTION: An earlier chart from Intellaprice included incorrect data. The chart is now updated to reflect corrected results for the dollar amount of change in overall food pricing and the percentage change in overall food pricing.