Restaurant traffic weakened in April, but there are some safe havens for investors
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New data shows that restaurants experienced a minor slowdown in traffic during April due to rising inflation and talk about a possible recession within the coming year. The NPD group conducts market research and tracks consumer trends to determine how prices have changed. Restaurant meals were more expensive in April than they were in 2019 before the Pandemic. The result was a decrease of 4% in U.S. restaurant visits for April compared to 2021. Rising prices have put added pressure on the consumers, which has contributed to the slowdown in restaurant business. It’s cheaper to cook at home for many customers,” David Portalatin of NPD Group, a food industry advisor said. This is where operators must demonstrate their value and offer solutions to support consumers in all stages of life. According to the report, rising restaurant prices are a major problem for families with children and those living in lower income households. Restaurant visits fell 11% for households earning less than $50,000 in April. However, they dropped 14% for families with children in April. Although consumers are tightening their belts some analysts express confidence in certain restaurant names. Cowen Equity Research released their latest Restaurant Conviction List. The list included five top picks, including Yum! Outperform ratings for brands, Darden Restaurants and Sweetgreen, as well as Chipotle Mexican Grill, McDonald’s, Sweetgreen, Sweetgreen, Sweetgreen, Sweetgreen, and McDonald’s Yum has been a favorite choice due to Taco Bell selling in America during the late evening or after-dinner hours. This is because customers perceive high value and trust the company’s offerings. Andrew Charles from Cowen Research, coauthor of this report, was also a senior researcher analyst. Chipotle’s pricing power has been demonstrated with a 10% price increase over last year, and with little resistance from consumers, Brian Niccol CEO stated. Even though Darden is not a household name, the Cowen Report says that Olive Garden has “outperformed during recessions” thanks to Darden. Charles stated in an interview that “I believe it’s crucial right now that you really want to concentrate on names with defensive characteristics in a turbulent backdrop for restaurants,” Charles added. Cowen interviewed 2,500 customers about their values perceptions of major brands. The top three restaurants according to all respondents were Wendy’s (or close to 50%), Taco Bell, and McDonald’s. Top-ranked were Sweetgreen, Panera and Domino’s. Cowen also found that Wendy’s and Domino’s were at least 50% in value perceptions for low-income customers. Even if restaurants offer value pricing they are vulnerable to losing customers in their delivery business. According to data from Blackbox Intelligence (a restaurant analytics company), the guest sentiment value for off-premises dining was lower than for on-site dining. These are measured by online restaurant reviews. Chipotle, which already has a mobile order system and pick up system that works well could help reduce the high delivery costs. Cowen stated that Chipotle’s loyalty program and digital ecosystem are a great way to increase their digital ordering for carryout. It’s an opportunity for them, Cowen said. “That’s nice for them to push for value they’ve seen previously for them.”
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