What's For Dinner?

For an increasing number of Americans, especially households making less than $150,000 a year, the answer doesn’t involve going to a restaurant. And lately when people do go out to eat, they are spending less money.?

Battered by?the long-term effects of inflation and higher than normal food prices, lower income consumers are pulling back on their spending and cutting back on trips to restaurants.

Recently, chains such IHOP and Applebee’s have noticed fewer consumers earning $50,000 a year and below visiting its restaurants.? Even when these consumers do dine out, they are carefully watching the amount they spend.

Although some higher-income guests have traded down to less expensive restaurants, behavioral changes are most pronounced among lower-income consumers and, in fact, higher-income Americans are dining out more.?

One fine dining chain noted recently that visits from diners earning more than $150,000 a year were recently higher compared to the same time the previous year.? Visits from diners with an annual income below $75,000 declined across the board.

People are clearly still dining out. However, the accumulated financial pressures and the inflation narrative are clearly in control.? In fact, nationally, only the highest earning households spent money in restaurants more often in 2023 than they did in 2019, according to a recent survey.?

Lower-income families with children are trimming their spending the most. Feeding a family of four has rarely, if ever, been more expensive. In fact, families earning below $50,000 with children pulled back on their restaurant spending more than any other demographic.

Typically, there are two main types of consumers spending at restaurants. One is looking for an experience for special occasions, where they can share food and enjoy a good time with friends and family. The other is looking for convenience at a lower price point.

Part of the challenge is that restaurant prices are rising faster than grocery prices. Prices for meals consumed outside of the home were up sharply between 2023- 2024.? Conversely, grocery inflation was more modest and likely influenced an increase in meals cooked at home as spending shifted to lower cost options.

For example, home-cooked meals typically cost $5-$6 per person, while meal kits run $7-$8 per person, including shipping. With meal kits, you avoid using gas and the cleanup likely requires less water and energy, though you may generate more cardboard and paper waste.

Furthermore, purchasing grocery items in bulk can lead to significant savings, though the exact amount depends on the specific product and retailer. According to LendingTree, bulk buying provides shoppers an average discount of 27% compared to smaller quantities.

However, research indicates the potential savings can range widely from 25-35%, based on the particular item and store. For instance, bulk purchases from wholesale clubs can yield savings up to 35% over supermarket prices.

In fact, nearly 90% of U.S. adults now belong to at least one loyalty program, often citing inflation as a key driver for their participation. Moreover, a majority (60%+) are members of Amazon Prime, Walmart plus, or a warehouse club, clearly demonstrating consumer demand for cost-savings.

Further, dining out is considered a discretionary treat for many consumers.? Because of this, it’s often the first thing that gets cut back when people want to trim their budgets. Although inflation is cooling, a recent survey by a large bank noted that 42% of Americans surveyed said they planned to pull back their spending on dining out and takeout in 2024.?

The average cost of a meal out at a fine-dining restaurant was approaching $50 per person in 2023, up almost 20% from the same meal in 2019.

However, fast-food restaurants are rapidly becoming more expensive. The average price of a meal at a fast-food restaurant increased almost 25% between 2019-2023! ?By comparison, eating at a casual restaurant increased approximately 20% over that same period. ?

One famous high-end chain has noted that its diners have been consuming less.? People are ordering fewer items to complement their main entree compared with the same time a year ago and they are ordering fewer alcoholic drinks.?? Further, diners over 65 were increasingly opting for lunch, which usually costs less, instead of dinner.?

I personally took advantage of a recent offer from a High-End steak house.? They offered a three-course meal for $69 before wine, tax & tip.? This was a great value considering that the steak I ordered was on the regular menu for almost as much as the entire fixed price meal!

Rising labor costs are a big factor behind increasing menu prices. ?In addition to the ongoing effects of labor shortages the past few years, new minimum wage laws aren’t helping. California’s law setting a $20-an-hour minimum wage for fast-food workers will further raise costs for restaurants and these cost increases could be passed on to diners.

The wage increases for restaurant workers come as wage growth for the country’s lowest-paid workers?have exceeded increases for other groups over the past four years. ?

Everyone loves a bargain and the great thing about inexpensive services is that even lower-income families get to enjoy them.? Prior to these wage increases and inflationary pressures, no matter what your budget was there was a restaurant that you could afford to take your family to.

Restaurant loyalty programs have become an increasingly important way for consumers to save money as costs spiral out of control. These days everyone’s favorite quick serve restaurant has a loyalty program and most casual spots have one too!

Over half of all consumers (50%+) join these programs specifically to take advantage of the cost savings. This trend is even more pronounced among millennials, with around 70% using loyalty programs to save money.

Inflation may be cooling, and interest rates are likely to fall but consumer prices won't recede quickly. A family of 4 that plans on eating out once a week should budget at least $500 per month considering current food and labor costs.

When treating yourself to a night out, plan ahead. Review menus online and look for restaurants with themes and price points that fit your budget.? Consider “Bring Your Own” (BYO) choices for guests that are price sensitive or don’t drink.

Utilize loyalty programs and take advantage of bulk pricing when auditing your grocery spending to build your target monthly budget.

Though Americans may dine out less, our appetite for good service and delicious meals will never fully disappear.? By following a few simple steps, you can save money and easily decide "What's for dinner?"

Some Food For Thought:

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·?????? When dining out, make thoughtful choices from a wide array of great options at diverse price points.

·?????? To stay within your budget, plan ahead by reviewing restaurant menus online and select dining options that suit your financial constraints.

·?????? Opting for BYO restaurants can help broaden your dining options and better accommodate your budget.

·?????? Take advantage of Loyaly Programs to get the best bang for your buck.

·?????? To stretch your grocery budget, considering shopping in bulk or using price clubs.

·?????? Gather the family for a home-cooked meal, where each member contributes to the preparation and enjoyment of the evening.

If you found this article useful and need some help with your savings and investment goals, we should meet to discuss other ways you can fare better in this age of inflated prices.