Sit-Down Restaurants Combat Inflation with Affordability Push

In response to the rising prices of fast food chains, sit-down restaurants such as Applebee’s and Chili’s are promoting deals and highlighting their relative affordability compared to fast food options. This tactic is aimed at appealing to lower-income customers who may be feeling the pinch of inflation and economic uncertainty. According to John Peyton, CEO of Applebee’s parent company Dine Brands, sales at Applebee’s locations open at least a year slumped 4.6% in the first quarter, with customers earning less than $50,000 per year visiting less frequently and spending less when they do. Meanwhile, Chili’s President Kevin Hochman pointed out that the chain’s social media team has noticed customers expressing frustration with the high prices of fast food items on platforms like Twitter. However, while these sit-down restaurants offer a slower dining experience, they may still be considered a good value by customers due to the perceived quality of their food. As a result, some high-income consumers are flocking to fast-casual chains like Chipotle, Sweetgreen, and Wingstop, which have reported strong sales despite the broader consumer slowdown affecting other eateries. These chains have also benefited from improving throughput, or the number of orders that can be made by staff, resulting in faster service and increased transaction volumes. Fast-casual chains have raised prices less dramatically than traditional fast food outlets, making their offerings more affordable for some consumers. Additionally, these chains tend to serve higher-income neighborhoods, further insulating them from the spending pullback experienced by lower-income households. Overall, investors have responded positively to this trend, with shares of Chipotle, Shake Shack, Sweetgreen, and Wingstop all experiencing significant gains in 2024.