This deep into the inflation cycle, restaurants are working against a relatively clear picture. Diners are showing up less often, managing their checks, and gravitating toward compelling value at the lower end of the income spectrum.
In William Blair’s eighth edition of its quarterly engagement survey, respondents reported average monthly spend of $219 at restaurants, up 1 percent, year-over-year, on mixed trends. By age, spending growth was led by a mid-20 percent jump for those 45- to 60-years-old along with a low-teens rise for guests under 30. It was partly offset by mid-single-digit declines among 30–44-year-olds and respondents over 60.
The number of people spending less than last year was in line with prior surveys at 36 percent, although, as William Blair pointed out, it did slide somewhat on a sequential basis from a survey high set in June primary due to a decrease in check management alongside higher frequency.
In plain terms, guests “eating less often than last year” at specific restaurants continue to outpace those who eating “more often.”
William Blair asked diners why they were showing up less frequently. Just over 85 credited “inconvenience.” “Too expensive” was the next trigger.
While it’s naturally still early in CEO Brian Niccol’s term (he started in September), Starbucks remains an outlier among quick-serves in terms of why people aren’t showing up as much as last year. Only two chains in the below graph (to note, the brands included are in William Blair’s coverage) topped as “too expensive”—Starbucks and The Cheesecake Factory. Everybody else was “inconvenient,” with Shake Shack also matching its top detractor with “health/diet” (the only brand to do so).
Consumers in William Blair’s surveys have continually ranked restaurants’ current value proposition as modestly above average at 3.1 (5 being the highest), similar to June, when it was 3.0. Dutch Bros and Potbelly topped this current list in value perception, followed by The Cheesecake Factory and sweetgreen.
On as sequential basis, more than 70 percent of concepts posted improvement, with the largest gains at Pinstripes, Dutch Bros, Kura Sushi, and Potbelly, while Dave & Buster’s, The Cheesecake Factory, and El Pollo Loco were the only chains to show sequential deterioration.
What’s interesting to note about Cheesecake Factory, however, even on a sliding slope, is how being “too expensive” remains the No. 1 biggest burden to visits, and yet the chain also is the second highest rated concept in “value perception.”
The brand’s textbook-thick menu, price, and polished experience are not being counted as a “bad value” by consumers. They’re watching how often they show up. When they do, though, the perception of what they got for what it costs appears to be high.
The chain has been a steady performed in terms of top-line sales. Its comps in Q2 came in at 1.4 percent, year-over-year. That broke down as negative 0.2 percent traffic, 2.9 percent of unfavorable mix (versus negative 4.3 percent in Q1), and 4.5 percent price (that was 5.2 percent in the prior quarter). Cheesecake Factory’s pricing will be a touch over 4 percent for the back half of the year with hopes it can return to a more normal 2.5–3 percent cadence in 2025.
If not for July 4th softness—seen industry wide—the brand told investors in August it likely would have reported flattish traffic last quarter.
Cheesecake Factory posted 24 percent year-over-year growth in earnings per share and reached record average weekly sales that pulled out to average-unit volumes of $12.5 million. Additionally, restaurant-level margin rose to 17.7 percent—the highest result in six years, and consolidated four-wall margins climbed 90 basis points to 16.1 percent.
And as you can see in the chart below, Cheesecake Factory is not struggling all that much to hold “value” scores despite being “too expensive.”
Some other trends to follow, from QR codes to loyalty to kiosk
Overall restaurant engagement showed mostly healthy in William Blair’s survey, with 79 percent of respondents saying they eat at restaurants at least a few times per month (September data), including 6 percent who said they eat out daily. That number was 80 percent in June and 85 percent in the prior-year survey. Again, there’s been a year-over-year downtick in traffic, as seen throughout much of the sector in recent months (quick service as a category declined 2.1 percent in August versus the prior year, per Revenue Management Solutions; the category has faced more than a year of negative traffic comps after 2023 was down 1.3 percent from 2022).
Monthly spending at restaurants in September was up a touch (1 percent) year-over-year and only 36 percent of people said they were spending less relative to the prior year—both points support William Blair’s observation consumer spending is holding up, broadly speaking.
The percentage of respondents ordering food either a few times a week or daily was 50 percent for those under 60, compared with only 39 percent over 60. There was also clear correlation to income level, William Blair explained, with just more than half of respondents earning north of $100,000 ordering food a few times a week or daily, compared to those earning less than $50,000, where 31 percent ordered food a few times a week or daily.
Additionally, reported restaurant interactions continue to track steady at an estimated nine per month this quarter (up 3 percent from September 2023).
Off-premises business—inclusive of drive-thru, takeout, and delivery in this case—accounted for 65 percent of interactions in the quarter. In-person was 35 percent.
As in recent surveys, William Blair said the data supports its view the pandemic structurally changed consumer behavior (38 percent of respondents said ordering for delivery and/or takeout increased since 2019, relative to just 20 percent noting it decreased).
Also, the reported frequency of drive-thru interactions once again exceeded takeout and delivery, “and we believe macroeconomic pressures could be driving the recent uptrend in drive-thru and takeout interactions,” the analyst said.
This pulsed in the last survey as well. Could higher prices send more guests to the drive-thru line where they can avoid added fees, or back into restaurants to grab off shelves? Data suggests so.
The thought, William Blair added, was further supported by “numerous responses” it received on the survey referencing growing fatigue with the cost of eating out and ordering delivery. Elevated menu prices, fees, and tips were chief among the complaints.
In-person dining was the most common form of interaction (average of roughly 3.2 days per month), followed by drive-thru (2.4 days per month), takeout (2.4 days per month), and delivery (1.2 days per month).
The survey also tapped into the evolving sentiment of digital channels. Sixty percent of respondents said they were comfortable using QR codes to order/pay for food in a restaurant (40 percent were not). That was up from 59 percent in the prior survey.
Open-ended commentary, however, repeatedly conveys guests, even those who are comfortable with QR code usage, generally prefer physical menus. Still, survey results indicate changing preference and adoption.
And it’s vital to separate by age groups. Only 50 percent of respondents under the age of 60 were not comfortable using QR codes, as opposed to 73 percent above the mark. When asked about kiosks, 53 percent of respondents noted they were comfortable navigating the menu, ordering, and paying for food through the in-store screens. Forty-seven percent were not.
Yet the most prevalent ordering method across age groups remained in-person or over the phone (about 49 percent for takeout—up from 44 percent last survey—and 40 percent for delivery—up from 36 percent). It was followed by direct ordering through a restaurant’s website or app (roughly 34 percent for takeout—a rise from 33 percent—and 29 percent for delivery—a decline from 30 percent). The use of third-party marketplaces was higher for delivery (19 percent of orders in September compared to 20 percent in June) than for takeout (6 percent versus 7 percent for September and June, respectively).
Unpacking demographics, excluding those over 60, the percentage ordering in person or over the phone was 46 percent, higher than 37 percent last quarter, and 33 percent for delivery, up from 26 percent.
When ordering delivery, people under 60 were more likely to go direct (28 percent) to third party (26 percent). “We continue to believe that demographic shifts and growing comfort with digital channels will drive an ongoing mix-shift toward digital ordering by consumers,” William Blair said.
As for why, convenience and time constraints topped the list, as you’d expect. Sixty-seven percent cited these as main factors followed by preference not to cook (24 percent).
The final topic William Blair covered was the usage of brand loyalty programs. This, too, jumped notably from the last survey, with 55 percent of respondents in September saying they actively participate in loyalty platforms (up from 52 percent in June and 47 percent in March; including 59 percent of respondents under 60 who reported using them).
Forty-one percent also said loyalty programs were either “somewhat” or “highly” influential on their decision where to eat, staying in line with past surveys. The proportion of those who said loyalty programs do not influence their decision on where to eat, though, has shown a clear downward trend.
