Restaurant consumer sentiment defies economic projections in fall 2023

We have reached the dreaded personal-finance cliff. Student loan forbearance has ended with payments to resume this month, inflation is affecting finances for 80% of those we surveyed, and the household savings rate is dipping deeper into the red in the home stretch of 2023, yet our research suggests upside surprise for restaurant companies this fall.

AlixPartners’ Autumn 2023 Restaurant Consumer Sentiment report finds that restaurant dollars will be “line leaders” in discretionary wallets as consumers venture into the remaining months of the year. While inflation-induced discretionary spending cutbacks originally prioritized retail goods and some subsequent tightening in restaurants, recent polling suggests consumers are rapidly shifting their focus to more hastened cutbacks in travel and leisure.

Our sentiment indicates consumer mindset has adjusted to inflation persistence, easing acute consumer financial anxiety present earlier this year. At least 80% of respondents say inflation has impacted their finances but consumers feel more optimistic now on their financial outlook than going into 2023, with younger generations seeing the greatest shift in attitude. Consumption as a share of disposable income has climbed to around 90%, per the Bureau of Economic Analysis; the highest level since 2019. Meanwhile, the portion of consumers reporting heightened concern about future finances in our sentiment survey dropped from 41% in December 2022 to 28% in September 2023.

Consumers say restaurants will be their top non-essential purchase to feel indulged and indicate that quality trumps quantity in both restaurant and travel segments, with many willing to reduce frequency over trading down on experiences. But despite high-quality dining occasions being prioritized, overall discretionary spending is likely to shrink. In fact, our research suggests restaurants will be the most pressured expense category for student loan borrowers, and tightening is currently planned across the non-essential consumer wallet going into the holidays.

Restaurant companies must strategize for this dynamic. Agility will be required to serve an increasingly more discerning guest. Menu engineering and pricing strategy will make or break in the next environment, and brands should better identify target consumers and trim portfolios for new consumer dynamics. Operators must be actively re-capturing productivity lost during the pandemic to fund both efficient growth, and thwart rising labor, energy and COGS pressures as food commodities potentially tick up again.

Companies should also be front-footed on selecting where and how to invest in AI: speed ignited by digital investments will become the leading “loyalty reward” for many to drive more sales in identifiable channels, especially in provoking a consumer showing stagnant-to-declining digital engagement and loyalty motivation. The lesson heading into a cloudy economic winter? Make it count.

Our Year-to-Date Restaurant Recap and Autumn Preview report explores the data in detail, and also contains key takeaways for talent strategies and digital efficiency. Contact us to learn more.