Casual-dining chains are seeing a shift in consumer behavior, according to Darden Restaurants CEO Rick Cardenas. Customers who are fed up with higher prices at fast-food restaurants are now turning to casual-dining chains like Chili’s and Applebee’s. While Darden itself hasn’t seen a direct benefit from this trend, its competitors are definitely reaping the rewards.
Chili’s, for example, has launched an ad campaign taking aim at fast-food prices, specifically calling out popular items like the Big Mac. Applebee’s has been focusing on offering deals to entice customers who typically opt for fast food. This strategy seems to be paying off, as industry data suggests that more people are choosing casual dining over quick-service restaurants.
Recent data from the Department of Labor shows that full-service menu prices have risen by 3.5% over the past year, compared to a 4.5% increase for limited-service eateries. Customers are feeling the impact of these price hikes, even at fast-food chains like McDonald’s. Despite efforts to appeal to price-conscious diners, McDonald’s has faced criticism for its higher prices.
In response, McDonald’s has introduced a new $5 value meal and offers free French fries on Fridays for mobile app customers. Darden, on the other hand, has focused on keeping its prices competitive and using television advertising to attract customers. While Darden’s recent earnings report showed flat same-store sales growth and weaker revenue than expected, the company is confident in its ability to weather the storm.
Despite facing a challenging consumer environment and increased competition, Darden remains optimistic about its performance compared to the broader casual-dining segment. The company’s stock rose slightly in morning trading, although it has seen a 6% decline this year due to concerns about consumer spending habits.
Overall, the shift in consumer behavior towards casual dining presents both challenges and opportunities for restaurant chains. By staying agile and responsive to changing trends, companies like Darden can continue to thrive in a competitive market.
