Restaurant industry’s battle for wallet-share intensifies as consumers plan to dine out and spend less, according to AlixPartners survey

21 May 2018

31% say lower restaurant prices important, up from 21% in last year’s survey

NEW YORK (May 21, 2018) – Restaurants will have to continue to battle for their share of consumers’ wallets this year, with Americans expecting to both dine out less and spend less per meal. That’s according to a survey of more than 1,000 consumers, released today by AlixPartners, the global consulting firm. Overall, consumers said they plan to spend an average of $14.95 per meal this year, down from the $15.20 they said they spent over the past year. Furthermore, 31% of respondents in the survey said that “lower price” was “important” or “very important” to them in defining value, vs. 21% who said that in a similar AlixPartners survey released in the spring of 2017.

The fast-casual sector may be hardest hit this year in terms of dining occasions, according to the survey, with just 20% of Millennials surveyed saying they intend to visit fast-casual establishments twice weekly or more over the next 12 months, compared with 24% who said that in the 2017 survey. Meanwhile, according to the survey, fast food has surpassed fast casual for as the preferred spot for lunch, with just 32% of diners in this year’s survey picking fast casual as their preferred location for lunch, down from 37% in AlixPartners’ survey of a year ago—while fast food was preferred for lunch by 35% in this year’s survey, up from 30% in AlixPartners’ survey of a year ago.

For all those surveyed who are planning to dine out less, saving money to re-allocate towards other expenses was the No. 1 reason, chosen by 54% of those surveyed, vs. 50% in last year’s survey. Meanwhile, among all respondents, travel and retirement were cited as the biggest outside “share-of-wallet” pressures, cited by 38% and 33%, respectively, as their top pick. And among Millennials, “lifestyle” purchases (e.g., home, car, etc.) was the No. 1 reason, chosen by 43% of Millennials, compared with 27% in the survey of a year ago.

“We’re starting to see a shift in spending patterns among the Millennial generation, and restaurant operators need to be prepared,” said Adam Werner, global co-head of AlixPartners’ Restaurant, Hospitality and Leisure Practice and a managing director at the firm. “A lot of focus in recent times has been on the buying patterns of this generation, but it’s important to understand that Millennials are now having families and children, and that their spending priorities are beginning to reflect that.”

The AlixPartners survey also suggests that technology’s influence on consumer dining choices may be plateauing.  For instance, the percentage of respondents rating nine major technologies, ranging from digital menus to mobile apps to mobile payments, as a “4” or “5” in terms of influencing restaurant choice (on a scale of 1 to 5) all declined in this year’s survey vs. the one released a year ago. However, when asked about their use of any mobile technologies by restaurant sector, 28% said they’ve used them in the fast-food sector (up from 23% in last year’s survey) and 23% said they have in fast casual (up from 18% in last year’s survey), suggesting that limited-service restaurants may be the most fertile ground for mobility.

At the same time, though, 40% of all respondents said they have never used any type of mobile technology related to dining, only a slight reduction from 42% in last year’s survey. Similarly, only 46% in this year’s survey said they are at least somewhat influenced by loyalty programs, the same percentage as in the survey released last year. And only 24% in this year’s survey said they follow their favorite restaurant on social media.

“There are two, very disparate consumer groups in this industry today: the technologically-engaged and those who are not—and, in fact, may never be,” said Kurt Schnaubelt a managing director in AlixPartners’ Restaurant, Hospitality and Leisure Practice. “It’s important for operators to fully assess investments they are making in technology and loyalty, to make sure they’re truly geared towards gaining net new market share, and not just wasting money chasing the latest fads.”

According to the survey, both delivery and take-out are expected to decrease slightly in the year ahead, particularly at fast-food and casual restaurants, with consumers saying they expect their monthly delivery and take-out orders to dip 11% (to an average of 3.34 visits this year) and 8% (to an average of 1.67 visits), respectively, vs. their number of visits in the past year. Meanwhile, respondents said they have increased interest in delivery and take-out from fast-casual and fine-dining establishments, saying they expect their number of annual visits to increase to an average of 2.06 visits and 1.48 visits, respectively, an increase 6% in each segment.

Among respondents who said they order delivery, 47% said they prefer delivery directly from the restaurant, vs. only 4% preferring to order via a third-party service (services such as Uber Eats, DoorDash, Postmates, etc.).

Meanwhile, meal-kit services (services such as Blue Apron, HelloFresh, Sun Basket, etc.) seem to be slow in gaining consumer adoption, according to the survey, with only 18% of respondents having tried such a service. In addition, 68% of those who said they haven’t tried a meal-kit service say they don’t plan to try one in the near future.

Survey results also suggest that ready-to-eat meals from grocery and convenience stores could be becoming a bigger threat to restaurants, with 25% of respondents citing such meals as a way to reduce restaurant spending, up from 19% in the AlixPartners survey released a year ago.

Among the other things also covered in this year’s AlixPartners survey: Consumer sensitivity to food-safety scares may be increasing, as 35% of respondents said they will “never” return to a restaurant chain that experienced a foodborne-illness event, regardless of the specific location of the incident. That compares with 28% who said that in a third AlixPartners survey, one conducted in the first quarter of 2016. 

About the Survey

The AlixPartners 2018 U.S. Restaurant Outlook was conducted in February 2018. It polled 1,005 U.S consumers and focused on current and planned frequency of dining occasions across convenience stores, restaurants and ready-to-eat grocery. It also looked at expected spending on meals outside of the home, preferred types of restaurants and criteria for consumer preference in restaurant selection. The survey forms the foundation of a report also released today by AlixPartners, entitled North American restaurants must target diverse consumers strategically—and continue battling share-of-wallet pressures.

About AlixPartners 

In today’s fast-paced global market, timing is everything. You want to protect, grow or transform your business. To meet these challenges, we offer clients small teams of highly qualified experts with profound sector and operational insight. Our clients include corporate boards and management, law firms, investment banks, investors and others who appreciate the candor, dedication, and transformative expertise of our teams. We will ensure insight drives action at that exact moment that is critical for success. When it really matters