Dive Brief:

• Restaurant visits fell the most during the quarter ending June 30 among households earning less than $75,000, according to a report from The NPD Group.
• One in four families earning less than $45,000 visited no restaurants, and frequency among these households declined 6% in the second quarter.
• QSRs, which attract a greater share of lower-income consumers than other restaurant types, have adopted differing strategies to retain customers.

Dive Insight:

While restaurant visits declined across all income levels during the past two years, the fall in visits among households with less than $75,000 in income could be a potential headwind. These households represent 46% of the U.S. population David Portalatin, NPD Group food industry advisor, said, making them a sizable market for restaurants to recapture. 

Families with children with incomes under $45,000 cut back five restaurant visits per person in the quarter ending June 2022, driving an overall 2% decline in total restaurant visits. These households decreased visits across QSR, full service and retail and foodservice outlets. 

In response to customers’ shrinking spending power, brands are focusing on value offerings to attract and retain lower-income consumers. Domino’s just launched a 50%-off pizza deal for online orders, Red Robin is offering a $10 meal option and Taco Bell is promoting a $5 Breakfast Box combo meal. 

Wingstop offers a $15.99 bundled boneless meal deal, which can feed three people, CEO Michael Skipworth said during Wingstop’s Q2 earnings call in July. That deal represented a 7% sales mix, the highest mix for a bundle, he said. 

Wendy’s is well positioned because it offers both a premium and value menu, and traffic held steady for consumers earning less than $75,000, CEO Todd Penegor said during Wendy’s Q2 call. Penegor predicted pressures will ease in the near term, giving consumers more net disposable income to drive traffic.

McDonald’s, meanwhile, is taking smaller, more frequent price increases to assess how its customers are reacting to inflation. 

“We’re seeing customers, and specifically lower-income customers, trade down to value offerings and fewer combo meals,” McDonald’s CFO Kevin Ozan said during his company’s Q2 earnings call.

Grocery stores may still be restaurants’ biggest competitors for low-income households despite the additional value offerings. Low-income households eat 89% of their meals and snacks at home and eat more frozen foods and shelf-stable foods, like canned pasta. But inflation overall may actually benefit restaurants in this case, as the food-at-home inflation rate is trending higher than restaurant prices in July, despite menu price increases at many restaurant brands.