Industry News | December 13, 2005

Technomic Deciphers Impact of Gas Prices on Restaurants

In its most recent consumer survey on the topic, Technomic asked consumers how gas prices were impacting their dining choices. On average, 40 percent said they had cut back within the last week.

Lower-income consumers weren't the only ones feeling a crunch. The percentage cutting back ranged from 43 percent of those earning less than $35,000 a year, to 35 percent of those earning over $75,000. Of those cutting back, 70 percent said they opted to eat food from home instead of dining out.

But if so many consumers are feeling a pinch, why haven't restaurants seen a corresponding drop in sales? To resolve the "what they say vs. what they do" question, Technomic analyzed its recent research against restaurant performance and current macroeconomic trends.

"Higher gas prices are putting a drag on restaurants' overall revenue growth," says Michael Allenson, Director of Technomic's Center for Consumer Research. "While only a small percentage of consumers are actually cutting back, many are restraining growth in their restaurant spending."

"The bigger impact is in consumer mindset," explained Allenson. "What is clear is that consumers across the board are very sensitive to the impact of gas prices on their budget and are gravitating towards food sources that they view as offering a good value." This change in consumer mindset was apparent in attitudinal data compiled by Technomic's ROOT (Restaurant Occasions Ongoing Tracking) research program, which revealed that consumers are more focused on price and value in their restaurant decision-making.

Even though gas prices have dropped recently, consumers still expect future increases. Those surveyed by Technomic estimated that, on average, gas would be back up to $2.96 a gallon by next summer and $3.90 in three years. "These expectations seem to indicate that consumers will remain more focused on value for some time to come," said Allenson. "And as long as consumers are concerned about gas prices, it's likely that restaurants will need to step up their efforts to compete for a slower-growing pie."

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