Cracker Barrel and Olive Garden take a hit as older customers lose their appetite for eating out

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Since the Covid-19 pandemic, Americans have developed a taste for eating at home. More than three years later, restaurants are still facing a foot traffic problem, and two iconic chains are struggling to retain their older customers as inflation takes a bite out of Americans' budgets.

WHAT'S HAPPENING

• Older consumers first stayed away from restaurants because of health concerns over Covid-19, and now they're being kept away due to inflation.?
• When it comes to customers over 65, Cracker Barrel restaurants "just have not yet recovered the visits,” the CEO says in a recent call with analysts.
• Cracker Barrel's latest quarterly earnings results show same-store restaurant sales grew 2.4% from the year before -- but that was driven by higher menu prices. Retail sales fell 6.8% compared to the year before.
• Darden Restaurants, which owns Olive Garden, Longhorn Steakhouse and Cheddar’s Scratch Kitchen among others, also says it's seeing declining visits from older customers.
• Darden's CEO says its base of customers over 55 dipped slightly from last quarter, noting traffic is down overall compared to pre-Covid levels.
• Other large chains, like Burger King, also have reported a dip in restaurant traffic as customers pull back due to higher prices.

INFLATION CONCERNS ON THE FRONT BURNER

• Restaurants have been raising menu prices during the past few years, so they get a sales boost because each bill is higher, even if fewer customers are buying their food or people are coming in less often.
• “The over-65 group is particularly value-conscious. And so we just haven’t seen the recovery of that group," Cracker Barrel’s CEO says, while the head of Darden Restaurants says customers 65 and older “were a little bit more spooked on the Covid side.”
• While Social Security recipients got a big raise this year (8.7%), the inflation surge? is still squeezing seniors, especially on rent and food.
• In July, menu prices rose slightly, just 0.2%. But over the course of the year, menu prices went up 7.1%, government data shows.
• Dine-in restaurants raised prices about 5.8% for the year, while fast-food and fast-casual chains increased menu prices 7.1%.

BIG PICTURE

• US inflation has taken a toll on family budgets. The typical American household spent $709 more in July than they did two years ago to buy the same goods and services, according to Moody’s Analytics.
• Some good news for eateries: Retail spending did increase across most categories in August, including at restaurants, Commerce Department data shows. But economists say US consumers could simmer down on spending as the economy is widely expected to cool in the coming months and lead to softer disposable income growth.
• Adding to the mix, Covid-19 concerns are back: Hospitalizations have been on the rise in the US for months, with weekly admissions now more than triple what they were two months ago. Nationally, more than half of new Covid hospital admissions were among patients 70 and older, and more than two-thirds were among those 60 and older, according to the latest CDC data.
• It’s unlikely that the restaurant industry will come to a sudden halt again, but chains are adapting to customers’ changing tastes, including testing new, smaller formats that are designed for to-go orders, along with drive-thrus that skip seating altogether.?

Have your eating habits changed because of inflation? What are some pandemic-era habits that you’ve embraced? ?Share your thoughts in the comments.?

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