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Surging fuel prices pressures restaurant consumers.

Surging fuel prices pinch restaurant consumers

While gas has slipped slightly since mid-March, but concern among patrons lingers

Gas prices continued this week to hover at near-record prices, adding to a portfolio of retail consumer concerns and restaurant patron push-back.

“Today’s traffic challenges are complex,” said Lisa W. Miller, president of Dallas-based Lisa W. Miller & Associates, “between lingering COVID concerns, poor customer experiences and now inflation with record-high gas prices and soaring menu prices.”

U.S. gas prices Monday averaged $4.252 a gallon after hitting a record $4.33 on Mar. 11, according to the American Automobile Association tracker. The prices rose in the wake of Russia’s invasion of Ukraine, and observers feared they could remain elevated all summer.

On Monday, the national average $4.252 was seven cents less than a week ago, 72 cents more than a month ago, and $1.37 more than a year ago, the AAA said.

“Consumers are at a crossroads,” Miller said. “The pent-up demand is high to dine out, yet experience doesn’t justify the price. It's not ‘worth it.’ If you have to raise the price, you have to up the experience. It’s just that simple.”

Recent data from Miller’s ongoing “Journey Back to Joy” survey series, which started in March 2020, found:

  • 59% of respondents were driving less because of gas prices, agreeing or strongly agreeing with the statement of “I am driving significantly less.”
  • 36% were dining out less often than earlier because prices have gone up too much
  • 28% were dining out less often now because the experience isn’t that good anymore

“Consumers are having to make choices in their everyday activities,” said Miller, who has collected more than 45,000 consumer interviews over the past two years of the coronavirus pandemic to provide business insights. The latest survey was conducted March 18 through March 21 nationally with 857 respondents 18 years and older.

Gas prices remain on the minds of restaurant chain executives.

Sandra Cochran, CEO of the 660-unit Lebanon, Tenn.-based Cracker Barrel Old Country Store Inc., said in a March 8 earnings call that the impact was “probably less about miles driven as it is about the impact they have on discretionary income.”

The Cracker Barrel family-dining concept, located on many tourist arterials, could impact the summer travel season, Cochran said.

“The kind of inflation that consumers are experiencing now in a lot of places, including gas prices, is something we're keeping an eye on,” she said.

Alexander Slagle, a restaurant equities analyst with Jefferies, noted that brands like 18,800-unit Ann Arbor, Mich.-based Domino’s Pizza Inc. were facing higher commodity costs as well as fuel price pressure. Those challenges “remain difficult to navigate/leverage given the fixed-dollar nature” of the restaurant business, Slagle wrote in a note earlier this month.

Miller said. “The single most important thing an operator can do today is to focus on their employees.”

That is more than training, she added. “Our employees make or break the brand. Ask yourself this question, is your ‘employee experience worth it?’ I f the answer is no, how can your guest experience be ‘worth it,’ especially during inflationary times?  When you make the employee experience worth it, that's when the differentiated brand magic happens for the guest.”

Contact Ron Ruggless at [email protected]

Follow him on Twitter: @RonRuggless

TAGS: Workforce
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