Traffic Increases Despite Higher Menu Prices

Customers visited restaurant chains more often at the end of 2011, even as menu prices rose — an indication of improved consumer confidence, according to The Bellwether Food Group Inc.

In reporting on fourth-quarter same-store sales at restaurant chains, the Topsfield, Mass.-based industry research firm noted that traffic increased at the same time that top-performing chains took price increases.
For example, Olive Garden raised menu prices by 2.1 percent and saw a 1.7-percent increase in traffic while sister company Red Lobster saw 1.3 percent more traffic and a 2.8-percent menu price hike.

Bellwether said the fact that Red Lobster customers were visiting more often, and spending more money when they did, was "the first surprisingly strong positive indicator in some time — a significant event."

In addition, Starbucks raised its prices by 2 percent, and the coffee chain recently reported that same-store sales were up by 9 percent in the year ended January 1. Bellwether also noted that Red Robin, Famous Dave's and Cracker Barrel all implemented price increases — of 5.6 percent, 3.1 percent and 2.4 percent, respectively — but did not see decreased traffic, which it said was "another sign of improving consumer sentiment overall."

Parent company Darden Restaurants reported a 2-percent increase in same-store sales at Olive Garden and a 6-percent jump at Red Lobster. Other top performers from the quarter included Chipotle, McDonald's, Starbucks, Dunkin' Donuts, Texas Roadhouse, Steak 'n Shake, Domino's, Panera and Buffalo Wild Wings.

Bellwether noted that each of the successful brands had unique positioning and understood the needs of their customers.

"Interestingly, when you talk to one of the senior executives at any of these brands, they don't talk about or ever really worry much about what their competitors are doing or not doing. They focus on executing their strategy and directives," the report said.

On the other end of the spectrum, Bellwether singled out Ruby Tuesday, Logan's Roadhouse and Burger King as struggling companies that suffered from "brand relevance and consistency issues." The firm also warned that Subway's net unit growth was starting to cannibalize sales at existing restaurants, noting that average unit volumes at Subway's roughly 24,000 domestic units declined by $15,000, from $434,097 to $419,245, in the fourth quarter.

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