Customers arrive at the Olive Garden store in San Antonio, Texas.
Callahan O’Hare | Bloomberg | Getty Images
Casual dining chains are attracting customers frustrated by rising prices for fast food, Darden Restaurant CEO Rick Cardenas said Thursday.
While Darden itself did not benefit from the shift, its competitors, such as the owners of Chili Brink International and Applebee’s parents. Catering brand, has been reigniting competition with its fast-food peers — and it seems to be working. Chili’s has launched an ad campaign touting the price of Big Macs and other fast-food burgers. Dine Brands CEO John Peyton told CNBC in May that Applebee’s has been leaning toward winning over fast-food diners through deals.
During Darden’s quarterly earnings call Thursday, Cardenas told analysts that industry data shows there’s been “some shift away from (quick service restaurants) toward some of these competitors” in the casual dining space.
Full-menu prices increased 3.5% over the past 12 months through May, while prices at limited-service restaurants increased 4.5%, according to the Labor Department. During the same period, the general consumer price index rose by 3.3%.
Consumers have been feeling the pinch from more than two years of price increases, even at fast-food chains, which typically benefit from tougher economic conditions as consumers turn to cheaper food. But compared to fast food, full-service restaurants and grocery stores are emphasizing their value, both in terms of actual price and overall experience and quality.
especially, McDonald’s Its higher prices have drawn backlash from customers, social media users and even House Republicans. In an open letter in late May, the company’s U.S. president, Joe Ehlinger, Strike Back Critics claim its menu prices have doubled, saying prices have only increased 40% since 2019.
Even so, the company has taken steps to try to attract price-conscious diners. On Thursday, McDonald’s announced a new $5 Value Meal and on Friday offered mobile app customers free French fries with a minimum purchase of $1.
Darden has been using different strategies to win over diners. It relies on television advertising and keeping overall pricing below inflation to attract customers. In its fiscal fourth quarter, the company reported flat same-store sales growth and lower-than-expected revenue, even as its profit topped Wall Street expectations.
Cardenas said the company has dealt with “continued soft consumer conditions” as well as increased discounting and marketing pressure from competitors. Still, executives tout that its restaurants are outperforming the broader casual dining sector.
Darden shares rose more than 1% in early trading Thursday. The company’s shares have fallen 6% this year, weighed down by concerns about the consumer environment.
About The Author
