Customers arrive at an Olive Garden location in San Antonio, Texas.
Callaghan O'Hare | Bloomberg | fake images
Casual restaurant chains are gaining customers who are frustrated by the higher prices of fast food. Darden Restaurants CEO Rick Cardenas said Thursday.
While Darden has not benefited from the change, its competitors, such as the owner of Chili Brinker International and Applebee's father dine brands, have been reigniting a rivalry with their fast food counterparts, and it seems to be working. Chili's introduced an advertising campaign highlighting the prices of the Big Mac and other fast food burgers. Dine Brands CEO John Peyton told CNBC in May that Applebee's has been leaning into deals to win over fast-food diners.
On Darden's quarterly earnings conference call on Thursday, Cardenas told analysts that industry data is showing “little change from [quick-service restaurants] to some of those competitors” at a casual dinner.
Through May, full-service menu prices had increased 3.5% over the past 12 months, compared with a 4.5% increase for those at limited-service restaurants, according to Labor Department data. The general consumer price index increased 3.3% in that period.
Consumers have been feeling the impact of more than two years of price increases, even for fast-food chains, which typically benefit from tougher economic environments as consumers opt for their cheaper meals. But both full-service restaurants and grocery stores have highlighted their own value compared to fast food meals, whether it's the actual price or the overall experience and quality.
In particular, McDonald's has faced backlash from customers, social media users and even House Republicans for its higher prices. In an open letter in late May, the company's US president, Joe Erlinger, responded to critics who claimed its menu prices had doubled, saying its prices had increased only 40% since 2019.
Still, the company has taken steps to try to attract price-conscious diners. On Thursday, McDonald's announced a new $5 value meal, plus free fries on Fridays with any purchase of at least $1 for its mobile app customers.
Darden has been using a different strategy to win over diners. He has relied on television advertising and kept his overall prices below inflation to attract customers. In its fiscal fourth quarter, the company reported stable same-store sales growth and weaker-than-expected revenue, although its earnings beat Wall Street estimates.
Cardenas said the company has dealt with a “consistently weaker consumer environment” as well as increased discounting and marketing pressure from rivals. Still, executives touted that their restaurants are outperforming the broader casual dining segment.
Darden shares rose more than 1% in morning trading Thursday. The company's shares have fallen 6% this year, dragged down by concerns about the consumer environment.
