According to market research firm NPD Group Inc., Americans went out for lunch 433 million times less last year than the previous year. That resulted in a net loss of $3.2 billion for restaurants and represented the lowest level of lunch traffic in 4 decades.
Worse yet it may be a tall order to get those customers back. It’s a matter of economics and scheduling and the numbers do not add up in favor of eateries.
Time A Factor
Going out for lunch isn’t just a drain on the pocketbook – it’s a drain on work schedules. Far too many busy executives find they can “pack” or have food delivered to the workplace and eliminate travel time, parking and other issues that make going out to lunch inconvenient.
Even when meeting with clients it is easier to meet customers on-site and have a working lunch in a conference room or office. As might be expected, restaurants are adapting to this phenomenon by offering delivery, faster service and smaller portions. Still, the food industry makes more money at its own location and has to factor in the cost of delivery when going off-site.
Cost Also An Issue
The price of lunch at a local restaurant used to be competitive with the cost of a packed lunch. Not so much anymore. Rising labor costs have increased the cost of a restaurant meal. Supermarket prices for food, meanwhile, has been going down.
The Wall Street Journal compared the price of a chicken burrito from Chipotle Mexican Grill Inc. (NYSE:CMGC) with a nearly identical one made from scratch at home and heated up at work. Chipotle’s burrito came in at $6.70 and the homemade version priced out at $3.70.
Casual sit-down restaurants have taken the biggest hit. They include Dine Equity Inc.’s (NYSE:DINC) Applebee’s and Ruby Tuesday. These restaurants suffered mostly for the time it takes to sit down, have orders taken and be served.
Fast casual chains have the time problem beat but not the cost. This has led restaurants like Brinker International Inc.’s (NYSE:EATD) Chili’s Grill & Bar and Darden Restaurants Inc.’s (NYSE:DRIC) Olive Garden to offer lunch specials that cost less than a fast food meal. It’s a tactic that seems to have worked at least for now.
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Beating The Odds
Despite current trends, some chains still get lots of traffic every day for lunch. Included on Ranker’s list of “Best Restaurant Chains for Lunch” are Noodles & Co. (TSX:NDLSC), Chipotle Mexican Grill Inc., The Cheesecake Factory (NASDAQ:CAKEC), Chili’s and Red Robin Gourmet Burgers Inc. (NASDAQ:RRGBC).
Each of these chains faces the same struggles as others in the space but have managed to gain favor with customers, no small feat in today’s cost conscious dining sector.