Are We in a Restaurant Bubble?
In today’s newsletter:
- Are We in a Restaurant Bubble? Eating Out in 2023
- Trust-Busting, Commodities, and Charitable Giving
- Leadership advice from the King Solomon
We’ve all felt it.
Whether it’s a nice evening out with a few friends, or a quick meal at a fast-food restaurant, it can be shocking to see the total at the bottom of the bill. It seems like eating out is a different (and costlier) experience than pre-pandemic, but if you’re like most people, you don’t keep a detailed log of the prices, so it can be hard to know for sure. Inflation has been high the past few years, but still something seems off.
A recent post on X, where a father of four young kids complained about the untenable price of eating out, went viral, eliciting strong reactions, comments, and agreement. He mentions that eating at Panera cost him $73, a local grill was $78, and even IHOP rang in at over $60 for a low quantity of non-specialty food. So, we decided to do a quick, unscientific survey of our own where we spoke to readers from 12 different states across the country to hear what they think about the cost of eating out in 2023 and how they feel about the experience. Here’s a sampling of what we found:
Do you feel that the cost of eating out right now is generally a good value, about what you would expect, or not a good value?
“Not a good value.” – Aimee, California
“It’s not a good value. I don’t [eat out] as much as I used to.” – Rick, New Mexico
“It’s too expensive.” – Damond, North Carolina
“In the last couple of years, not a good value.” – Vince, Georgia
In all, every person we spoke to felt that eating out was not a good value, with the exception of one man in Texas, single and in his early twenties, who said that it was a good value to him – but only because it allowed him to spend more time on sales. He was quick to acknowledge that his usual lunchtime order had recently increased 50%. The only other respondent who felt that eating out was a good value was a young married couple in Seattle, Washington, who do not yet have kids, and they emphasized the fact that Seattle has a lot of very high quality restaurants that make the experience worth the cost. Everyone else was quick to say, “Not a good value.”
In general, the people we spoke to have reduced the amount of times they eat out per week, largely due to cost, but there were other factors driving that behavior as well:
Have you noticed any changes in the general dining out experience the last couple of years?
“Oh yes. They’re always understaffed. There used to be a spirit of, I don’t know, fun? It just doesn’t seem as fun anymore.” – Roxanne, Tennessee
“Customer service is bad.” – Jacob, Utah
“The portion size has gone down, prices have gone up, and the overall attitude of the employees and service has degraded significantly. There are a few establishments withstanding, but as a whole I hold to that opinion.” – Vince, Georgia
“The service has declined, the cost increased, and the quality of food declined.” – Damond, North Carolina
“The quality has definitely gone down. Way less servers, longer waits.” – Aimee, California
Most agreed that the quality of service had declined, with the exception of Tanner, from Missouri, who actually felt that service had gotten a little better in the last couple of years, but he did point out that wait times were very bad, because establishments do not have sufficient numbers of employees.
“There was a Chili’s near where I live where only the bar was open for 6 months, because they didn’t have enough staff. – Tanner, Missouri
Paul and Brittany, from Washington, noted that eating out felt normal again now that COVID restrictions are a thing of the past, but they mentioned that some details of the dining experience have changed.
“You can order online… you see a lot more of the paperless menus and QR codes. There is a lot more technology involved in the exchange.”
Food delivery apps are affecting how people see restaurants as well – whether they are using them or not.
“Sometimes [in line] there are as many people working for Door Dash and Uber Eats as there are people waiting to get their own food. On-the-go is super emphasized.” – Wesley, Alabama
The result? Longer wait times.
Finally, the issue of tipping came up, unprompted, in many of the interviews we conducted. And people were not happy about it.
“People are entitled for tips… It used to be for if you did a good job, but now it’s like tips are expected, and not even just a 15% tip. It’s a 20% tip, especially when they throw a screen in front of you with a preselected amount.” – Kyle, Florida
“The tipping frenzy has gotten berserk. If I’m at a sit-down restaurant, I’m more than happy to pay a server for their job. For somebody running a cash register, sorry, but no thanks. This is coming from someone with 21 years of experience in the industry.” – Vince, Georgia
We spoke to Russel Wehesner, a restaurant developer in Texas, about the perception of rising costs, the decline in quality, and restaurants seemingly being run by a skeleton crew. He had this to say:
“Staffing is an issue, but the main problem is rent. I have a large chain restaurant that just finished up a 15-year lease and had to sign another one. They started at 100k in rent per year, now it’s suddenly 300k, and their health ratio is 11%. You really want to be under 8% as a restaurant. Cost of construction is up 50% in the last three years, so it’s just going to be tough for new restaurants, because the numbers are going to be so high to make it work for the developer.”
Tripling rent would crush just about anybody, and this was for a large, established chain. Other establishments don’t have the same bargaining power, and the cuts have to come from somewhere. So, we have smaller portions, higher prices, lower quality ingredients, fewer employees, and longer waits.
“People are still paying [the high prices in restaurants],” Russel continued. “but it’s just a matter of ‘how long will it last?’ The rents are insane, and it’s been a burden for a lot of groups.”
But what does it mean to say it’s a matter of ‘how long it will last’? People don’t have to eat out at all, in the majority of cases. Dining out is technically a luxury good, and widespread behavior change in this industry’s consumption could cause a cascade of restaurant failures, resulting in even more consolidation than we’ve seen already. And people are noticing the effects of the strange economy on their dining options.
“There’s not a good selection of mom and pop stores,” says Jacob of Utah. “There’s not a lot of family-owned restaurants to choose from that would do lunch deals and things like that. I miss that.”
“It seems like owners are a lot more money-conscious. I don’t blame them really, but it’s expensive, so we just don’t go out to eat as much now.” – Ashe, Montana
“The quality of the food is very similar to what you’d get at Wal-Mart…” – Wesley, Alabama
“Restaurants have marketed themselves as healthier than they actually are while still cutting corners to save on cost, rather than offering good, healthy food.” – Kyle, Florida
“It just feels like there are less and less unique restaurants, and more and more of the same thing over and over, and that makes me sad.” – Tanner, Missouri
“As a mom, it’s hard to cook every night, and you want something for when you’re tired. It’s just way too expensive now, and that’s a bummer.” – Aimee, California
Leaving our anecdotes and diving into more rigorous data, the results are the same: Restaurant prices keep going up, quality is down, and the trend lines are not good. Some have pointed out that the value proposition for fine dining has largely remained unchanged in recent years, and there is some reason to think people are less upset with the steakhouses of the world than they are with Chick-fil-A, Olive Garden, et al. But most consumers cannot afford to go to Ruth’s Chris three times a week, or even weekly, and an overall reduction in eating out might be taking place.
So, the industry may be in crisis, but in every crisis, there is an opportunity for those with the wit and willingness to innovate new solutions to serve their customers. Yet as economic pressures seem to hit restaurants from all sides – real estate, supply chain, inflation, customer price-resistance, debt burden, etc. – is there still room for casual dining and fast food in the modern economy?
Only time will tell.
“Thank you for your donation – would you like to tip 18%, 20% or 25% on that transaction?”
INDUSTRY INSIGHTS
Trust-Busting, Commodities, and Charitable Giving
Trust-Busting
Google lost its landmark antitrust case brought by Epic Games this past week, which alleges profiteering against app developers, in a verdict that took just a few hours to arrive. Google plans to appeal the decision, but for the meantime, they have been labeled a monopoly, and that may have implications for Apple, who has faced Epic Games in a lawsuit of their own, and is also facing similar antitrust suits abroad. In the EU, Apple is facing down the results of another sort of anti-competitive complaint, to where the tech giant is now going to allow rivals to access their tap and go technology in an attempt to avoid a large fine. Microsoft, meanwhile, maintains its streak of avoiding onerous antitrust rulings, with its recent, successful acquisition of Activision Games. Google and Microsoft, meanwhile, continue to push regulators to crack down on each other for alleged anticompetitive practices in cloud computing and AI.
Commodities
The price of sugar is down again as global supplies improve, after production shortages in India and elsewhere drove prices sky high last month. Oil markets remain skeptical of OPEC’s promises to reduce supply as crude oil futures marked their seventh consecutive week of price falls. Gold continues to decline after hitting record highs just a week and a half ago. Improved weather in Brazil has resulted in a sell-off of coffee futures, contributing to the continued slump in prices. Earlier reports of a copper surplus in 2024 have now reversed, indicating a shortage instead, as mine closures and disruptions squeeze the global supply. Some take the overall slump in commodity prices as a sign that inflation is under control, predicting growth in US stocks, while others have been warning since earlier this year that declining commodity prices indicate a worsening global economy.
Charitable Giving
Giving Tuesday saw a 10% decline in the number of donors compared with last year, and total contributions totaling $3.1 billion – less than once percent greater than 2022 (marking an actual decrease when adjusting for inflation). Prior to the big day, it was predicted that $3.45 billion would be raised or more. This is, perhaps, unsurprising, as charitable giving has been trending downward since its peak during the pandemic years and their stimulus checks. Non-profits also face increased competition for donations as the sector continues to crowd itself and consumers face dwindling disposable income.
Sunday School
Q. What does the word “Bible” mean?
A. “Book.” It comes from the Koine Greek word “biblia,” which means, “the books” or “the scrolls.”
TIPS & TRICKS
Leadership advice from the King Solomon
It’s no secret that the Book of Proverbs contains bite-sized wisdom that packs a punch on various topics relating to life, faith, and work. But though most of us would agree that Proverbs is a good place to start when looking for general principles about how to run our businesses or organizations in a godly way, far too often the time to study gets away from us. It’s worth spending a few minutes, however, pondering a relevant proverb and considering how it can be instructive for our lives, leadership, and legacy, no matter how busy we are.
Today, we want look at a few illuminative concepts in the Book of Proverbs.
Hard Work Pays Off
He who has a slack hand becomes poor, but the hand of the diligent makes rich. – Proverbs 10:4
Whoever tills his land will be satisfied with bread, but he who follows frivolity is devoid of understanding. – Proverbs 12:11
Proverbs reminds us again and again that, in a sense, there is no secret formula. Life is hard, and people who are steady and relentless in worthy pursuits tend to make out well. High risk, high reward ventures are all well and good if the product, technology, or timing is right – but we always want to check ourselves and ask if we are following hype, or if at bottom we are really creating wealth. Fads come and go, but good old fashioned hard work still pays off in the long run.
Honesty Is Still the Best Policy
Dishonest scales are an abomination to the Lord, but a just weight is His delight. – Proverbs 11:1
The integrity of the upright will guide them, but the perversity of the unfaithful will destroy them. – Proverbs 11:3
From time to time, it can be awfully convenient to omit certain information from your consumers, or to pad the envelope on your products, or to use questionable methods for getting a better price from suppliers, but at the end of the day, such needless deception is antithetical to our faith. God is not honored by people who call themselves by His name valuing a few extra bucks above righteousness – and above the people they are pulling a fast one on. This isn’t always perfectly clear cut. As a wise man once said, discernment isn’t just telling the difference between black and white, it’s telling the difference between white and almost white. Proverbs invites us to take a look at our business practices, let integrity guide us, and glorify God in our work.
Leaders Are Called to a Higher Standard
It is not for kings to drink wine, nor for princes intoxicating drink; lest they drink and forget the law, and pervert the justice of all the afflicted. – Proverbs 31:4b-5
There’s nothing morally wrong, most Christians will agree, with having a couple of beers at an office party, but Proverbs reminds us that as power increases, so does responsibility. Navigating that equation requires a certain amount of caution and prudence. Bob the janitor shouldn’t drink too much and say foolish things either, but there is far greater damage if the CEO does so. Likewise, just because it might not be “immoral” to ask that woman out, it often isn’t appropriate if you are her boss. There is an issue of authority and power dynamics that we can’t paper over. Just because there isn’t any actual bribery affecting a purchasing decision doesn’t mean that it’s all well and good that you accept extravagant gifts from vendors, depending on your industry’s regulations. Leaders need to be above reproach and be on the lookout for things that could compromise their good governance over their organization, always keeping an eye out for how their decisions affect the little guy and the people who depend on them the most.
In modern times, the Book of Proverbs has been divided neatly into 31 chapters – and incidentally, most months have 31 days in them. By reading just one chapter a day and making space to meditate on the principles and truisms we read, we can allow righteousness to define our organizations, and sleep well knowing that we’ve dug into the scriptures for real-life wisdom in our lives.
Try it. It just might change how you work.
Quick Hits
- Puerto Rican superstar rapper Daddy Yankee announces his retirement from music so that he can devote his life to following Jesus.
- Office Christmas parties scale back this year, given the state of the economy and shifting employee priorities.
- The Wall Street Journal says that buying a house just doesn’t make sense right now, and brings the data to prove it.
- A federal judge has ruled that World Vision’s policy that marriage is between one man and one woman is unlawful discrimination under Title VII.
- Scott Klusendorf offers a strategy for pro-life messaging in the state by state debate.
- Annualized inflation came in at 3.1% for November.
Guess the Prompt
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