How operators can navigate low consumer confidence without overusing discountsHow operators can navigate low consumer confidence without overusing discounts

Joanna Fantozzi

It’s no secret that consumer confidence is low, with 62% of people living paycheck to paycheck, according to data from Technomic. Inflationary challenges are present on restaurant menus too, with menu prices now 28% higher, on average, than in 2020, Technomic senior principal David Henkes shared during CREATE: the Event for Emerging Restaurateurs last week in Nashville, Tenn.

This dynamic of skyrocketing menu prices juxtaposed against stagnant household budgets has really resulted in concerning traffic numbers. “As non-prime costs continue to proliferate,” Henkes said, full-service dining is faring even worse than limited-service operators when it comes to maintaining traffic numbers.

With this dynamic expected to continue (36% of consumers expect their restaurant visits to decrease in Q3), many operators are taking the discounting route, though it’s not the only option.

“When you've got higher prices and declining traffic, you see deals,” Henkes said Wednesday during CREATE’s “Restaurants 2030” session. “The value wars have really erupted, not only in the QSR, where a number of chains are doing different promotions, but even on the full-service side… So what do you do if you're a restaurant? How do you then excite your consumers? Restaurants are trying to appeal to customers by bringing out the LTOs.”

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According to Technomic, limited-time offers are up 46%, which is where most of the menu innovation is happening since the core menu at many restaurants has not changed much. Beverages are a particularly hot category for innovation, particularly in the wake of non-alcoholic beverage chains growing in popularity, in categories like boba and dirty soda.

“There's a lot of trial and error going on, and it's typically all happening on the LTO side,” Henkes said. “I increasingly believe that beverage is one of the battlefields for restaurant innovation right now. If you look at what McDonald’s did with CosMc’s, and H-Tea-O, Swig, 7Brew, creative beverage concepts and drive-thru beverages are having [a moment].”

During Technomic’s second session at CREATE, Henkes and his colleague, Robert Byrne, director of consumer and industry insights at Technomic, noted that more than half of consumers say that the availability of LTOs is important when deciding to eat at a restaurant. Non-alcoholic beverages and cocktails unsurprisingly make the list of the most popular LTOs of 2023, though that list also includes popular comfort foods like ice cream and pizza.

When it comes to successful LTOs, two factors seem to be important for consumers: craveability and uniqueness: “that slight twist is the way to go,” Byrne said. For example, the top craveable LTOs of 2023 were variations on classic categories like steak and cake, and many included cheese as a primary ingredient.

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Many operators are leaning into menu innovation as a way to lure customers back without needing to discount — more than 85% of operators have changed their menus over the last year — with winning flavors including the sweet and savory flavor combination and sauces and condiments as traffic-drivers, especially when they’re spicy, chile-based sauces or ones that derive from global flavors, like gochujang and hot honey.

Contact Joanna at [email protected]