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Phil Mangieri is a Partner at Restaurant Research LLC - a research firm which provides clients with valuable restaurant store level benchmarking data for $1B+ chains. RR data, which is obtained through our extensive network of restaurant industry players, is used by clients to maximize unit... More
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Restaurant Research LLC
  • Implications Of Accelerating Menu Price Increases 0 comments
    Jan 18, 2013 2:40 PM

    Restaurant Research LLC

    (click to enlarge)

    Implications of Accelerating Menu Price Increases

    • A recent RR multi-unit franchisee survey reveals that operators increased their menu prices by an average of +3.8% during 2012. This number mirrors the +3.9% average reported comp increase for $1B+ chains during the first 3 quarters of 2012 and implies flat traffic for the industry which is not surprising given these same fairly stiff menu price increases (which are needed to maintain margins during a time of rising costs).
    • The interesting point is that 2012 comp trends for $1B+ chains steadily declined each quarter as higher prices helped contribute to slower sales: +5.3% during 1Q12; +3.7% during 2Q12; +2.8% during 3Q12. This reveals the fine line operators must balance between margins and traffic.
    • With our survey revealing operator intentions to implement even more aggressive price increases during 2013 (up +4.8%), the industry must also plan how to drive/maintain traffic or risk killing the golden goose. This is critical as we look forward to higher 2014 healthcare costs.
    • To this end, we believe operators will be required to execute at steadily higher levels in order to maintain their overall value equation (price/worth). But investments in menu innovation and stronger ops sure beat competing on price! Just so long as operators get their ROI right.
    • We suggest that everyone get comfortable with the new normal for the restaurant industry in which sales growth now predominantly comes from higher tickets (as opposed to traffic) as we find that continued economic stress on lower income consumers means they increasingly get priced out of the market (especially when considering an end to the payroll tax holiday in 2013).

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    Source: RR Survey of 23 franchisees operating 535 stores



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    More About Us

    Restaurant Research LLC leverages an extensive network of industry players as part of its annual Concept Benchmark Analysis due diligence process for 22 large US restaurant chains. Also, RR tracks store level data for all major chains with system-wide sales in excess of $1B across all major restaurant segments in order to produce 11 key Industry Data Topic reports.

    Copyright 2013 Restaurant Research® LLC. All rights reserved.

    Disclaimer of Liability: Although the information in this report has been obtained from sources Restaurant Research® LLC believes to be reliable, RR does not guarantee its accuracy. The views expressed herein are subject to change without notice and in no case can be considered as an offer or solicitation with regard to the purchase or sales of any securities. Restaurant Research's analyses and opinions are not a guarantee of the future performance of any company or individual franchisee. RR disclaims all liability for any misstatements or omissions that occur in the publication of this report. In making this report available, no client, advisory, fiduciary or professional relationship is implied or established. This report is intended to provide an overview of the restaurant industry, but cannot be used as a substitute for independent investigations and sound business judgment.

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