In the second quarter, Texas Roadhouse watched its comp sales bump close to 10 percent in April and May (8.7 and 9.6 percent, respectively) before softening to 5.2 percent in June. That trend carried through the first four weeks of Q3 at 3.9 percent. Troubling? The reality suggested something different, CEO Jerry Morgan explained at the time.

Historically, at the end of July, Texas Roadhouse gears up for customers to shift routines as they prepare for school. Casual chains generally brace for a relative downturn in August, September, and October. But the past couple of years didn’t mirror any playbook operators could dust off. Despite all of its recovery and upward growth through the pandemic, Q2 2022 marked the first time Texas Roadhouse recognized seasonal trends in its cadence. “It appears that more people are getting back to their normal routines when it comes to dining habits, work schedules, and vacations,” Morgan said.

It’s an alluring prospect and offers what might be the clearest window yet into what the sector’s “new normal” looks like. Softer comps or not versus 2021, Texas Roadhouse’s three-year same-store sales trends lifted at a rate of about 30 percent throughout Q2 in July.

Corporate units averaged weekly sales of $135,552, of which 13.1 percent stemmed from to-go. A year ago, the metrics were $126,442 and 16.9 percent, respectively.

Dine-in guest counts remained above both 2021 and 2019 levels. In the week before COVID, Texas Roadhouse generated $113,777, with to-go accounting for $8,741.

So the brand held four-wall sales with off-premises take close to $18,000 per week, well over double its pre-virus days.

Broadly, measuring trends and performance against 2019 is a more telling reveal. Insights platform Sense360 by Medallia believes, roughly two-and-half years from COVID’s onset, recent consumer sentiment plus public health guidance has brought restaurants to a post-pandemic era. Changes that appear lasting are a shift to flexible work and the prevalence of ordering through digital channels. Some others, like shifting loyalties across brands, are proving overstated.

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And to Morgan’s observation, various methods of measuring market stability convey 2022, thus far, has more closely mirrored 2019 than 2020 and 2022. “Though not fully back to pre-pandemic levels, the percent of leading restaurants and retailers with year-over-year sales trends near flat [not heavily up nor heavily down] is more similar to how it trended in 2019,” the company said.

Other data sets, like the rate at which restaurant and F&B retail brands trade rank with one another in sales trends, also indicate the market is more stable than 2020 and 2021 and is closer to that of pre-pandemic normalcy despite the concerns of inflation and recession.

But speaking of inflation

As menu prices run at 40-year highs, value perception has adjusted. It was an inevitable forecast. According to survey data released in August by Revenue Management Solutions, nearly one in two Baby Boomers reported getting less value from restaurants compared to one in four millennials. If you go back to May 2020, 70 percent of Boomers said they expected higher prices due to the pandemic. Less than half of millennials and Gen Zers did.

Value drops and menu hikes are affecting Boomers’ dining behavior, whether the current dynamic is a self-fulfilling prophecy or not, which brings up the question of whether restaurants are pricing out older generations. Forty-eight percent reported spending less on restaurants today as compared to last year. Just 8 percent visited a quick-service “more or much more” in the past month and 7 percent went to a national chain more often. Only 8 percent noted they expected to bump drive-thru usage, although it’s worth keeping in mind drive-thru frequency is already elevated from past norms.

One up-spin, though, is delivery has won over some older guests. While Boomers’ frequency remains below other generations, per RMS, 33 percent said they ordered delivery in the past month, up from 27 percent in Q1. This could indicate older groups formed new habits during COVID. In May 2022, 15 percent of Boomers anticipated using delivery more or much more.

But perhaps the loudest alarm is how Boomers are managing increasing costs. Fifty-two percent said they will reduce restaurant frequency altogether, while Gen Xers are choosing less expensive menu items or cheaper restaurants. Special deals and promos do help, though.

In sum, trade out activity is officially in motion.

Younger generations, however, are not balking at prices thus far. Eighty-four percent of millennials said they ordered delivery in the past month, followed by 69 percent of Gen Zers, and 61 percent for Gen X. In Q2, nearly one in three millennials visited quick-service restaurants “more or much” more in the past month.

And Gen Z is gaining, too. When looking at intentions to dine, 29 percent of Gen Zers said they’d visit the drive-thru more in the future, a jump of 18 percent since Q1 2022. Overall, Gen Zers and millennials reported spending more on restaurants versus this time a year ago.

While nearly 15 percent of respondents visited at least one sit-down restaurant in May 2022, among the generations, Gen Z was the most likely to return.

Returning to the broader topic, how are consumers adapting to a more expensive arena?

Here’s what Medallia found:

• Switching to buy fewer/cheaper products: 42 percent
• Avoiding eating out at restaurants: 37 percent
• Avoiding travel and leisure activities: 28 percent
• Using a car less often: 23 percent
• Using up savings I previously had: 18 percent
• Adding less to my savings/investments each month: 17 percent
• Reducing/stopping recurring payments I used to make: 13 percent
• Took on an additional job/investment/other way to make extra money: 10 percent
• Receiving financial help from friends/family: 10 percent
• Taking on loans/credit card debts I haven’t paid back yet: 9 percent
• Receiving more government benefits to help with costs: 8 percent
• Received a pay raise in my current job: 8 percent
• Found a job with better pay: 5 percent

 

Medallia’s data showed declining transaction trends across much of retail. Auto parts (–10 percent); beauty specialty (–10 percent); Amazon (–10 percent); home improvement (–10 percent); office supplies (–15 percent); and sporting goods (–17 percent) were all down double-digits.

Yet the F&B landscape has not shaken as much.

In recent months, a bevy of brands, from McDonald’s to Wendy’s, reported softening traffic alongside top-line gains. Essentially, they’re recording negative guest counts but higher checks, mostly thanks to price. Take Starbucks for example. The chain’s U.S. same-store sales increased 9 percent in Q3 as average ticket bumped 8 percent. Average weekly sales, executives said, were at all-time highs in corporate stores—30 percent above pre-COVID-19 levels. Q3 produced five of the top 10 grossing sales days in brand history, including a $410 million week.

But traffic inched just 1 percent year-over-year and remained below 2019 marks.

Drive-thru, mobile order and pay, and delivery accounted for 72 percent of Starbucks’ Q3 domestic revenues, a number that rose 9 percent systemwide to a quarterly record of $8.2 billion. Single transactions in those channels come with a much higher ticket.

And all of this is vital given lower-income guests are the cohort cutting out visits amid the costly climate. Wendy’s and McDonald’s executives noted they were following trends and ensuring they still had value propositions to balance the barbell. But it’s a moving target.

This below chart from Medallia is striking. The proportion of total restaurant spend coming from higher-income consumers has grown, with a corresponding decline on the other side.

From August 2021 to now, “changes to the price of products I shop for” has climbed 29 percent to 49 percent in the “biggest factors affecting household purchase decisions” measured by Medallia. Changes in number of staff/service level at retailers or restaurants clocked in at just 6 percent. And change in government policies regarding COVID was at only 5 percent.

The office guest

Restaurants are monitoring workplace shifts for many of the same reasons other foot-traffic businesses are—offices and adjacent buildings lead to lunch daypart and catering activity. Josh Kern, interim CEO of SPB Hospitality, a company that oversees 18 brands, including Logan’s Roadhouse and J. Alexander’s, noted recently these visits were climbing, perhaps thanks to the notion of companies dangling catering as a lure to incentivize in-office workers.

Medallia data showed 32 percent of workers were currently doing their jobs from home. That number in Q2 2020 was 40 percent. It dropped into the low 30s in Q3 2021 and seems to be sticking. There isn’t a lot to suggest trends will flip dramatically from here. The third edition of McKinsey’s and Company’s American Opportunity Survey, conducted alongside Ipsos from 25,000 Americans in the spring, found 58 percent of people (that equates to some 92 million workers) said they have the opportunity today to work from home at least one day a week. Thirty-five percent said they can do so five days a week. These held across America and from white- to blue-collar roles. Additionally, the survey discovered when people have the chance to work flexibly, 87 percent of them take it.

So to Kern’s observation, what’s left two-plus years into the crisis might not exactly be a work-from-home revolution, but rather a flexible one.

Forty-one percent of employed respondents in the study said they don’t have the choice—a reality owning in equal parts to jobs that can’t be done remotely and companies that simply don’t allow for it.

Eighty-seven percent of workers offered at least some remote work said they agree to it and spend an average of three days per week working from home. People offered full-time flexible work spent more time working remotely, on average, at 3.3 days a week.

Either way, the landscape is crystalizing. Despite the early doomsday reports of mobility being stripped from routines, there remain opportunities to attract in-office workers for dining out or ordering in. It’s just not as even as it was before. However, it might pulse when chances arise.

Some views on loyalty

Here’s a look at how the pandemic might have adjusted loyalty. If you take the top two slots, 65 percent of guest are either just as loyal or more so than pre-virus. That’s a win for chains that had to prove their mettle in the 2020 trough.

How did the pandemic change your views on the brands you are, or may have been loyal to?

Restaurants

• Same as before: 42 percent
• More loyal to same brands: 23 percent
• Now loyal to more brands: 10 percent
• Less loyal to same brands: 21 percent
• Now loyal to fewer brands: 13 percent

 

In fact, average customer loyalty in restaurants climbed from 35 percent in 2019 to 37 percent last year.

Medallia examined Chick-fil-A as a case. The proportion of “new” and “lapsed” customers in a recent 12-month period was nearly identical to a calendar stretch pre-COVID.