Darden Restaurants CEO Rick Cardenas said casual dining chains are stealing customers from fast-food restaurants, while Chili's, Applebee's and other casual dining chains are competing for them. McDonald's has faced backlash from customers, social media users and even Republican members of Congress over its price increases.
Casual dining chains are attracting customers frustrated by rising fast-food prices, Darden Restaurants CEO Rick Cardenas said Thursday.
Darden itself hasn't benefited from the changes, but rivals such as Chili's owner Brinker International and Applebee's parent Dine Brands have rekindled their competition with fast-food restaurants, and it appears to be working. Chili's has run an ad campaign slamming the prices of its Big Mac and other fast-food burgers. Dine Brands CEO John Payton told CNBC in May that Applebee's is emphasizing sales to attract fast-food customers.
During Darden’s quarterly earnings call on Thursday, Cardenas told analysts that industry data “is a testament to the fact that [quick-service restaurants] Some of the “competitors” in casual dining.
As of May, full-service menu prices had risen 3.5% over the past 12 months, while prices at limited-service restaurants had risen 4.5%, according to Labor Department data. The overall Consumer Price Index rose 3.3% over the same period.
Consumers are feeling the pain of more than two years of price hikes, even at fast-food chains, which typically benefit from a tough economic environment as shoppers switch to cheaper meals. But both full-service restaurants and grocers are highlighting their value compared to a fast-food meal, whether that's the actual price or the overall experience and quality.
McDonald's in particular has faced backlash from customers, social media users, and even Republican members of Congress over its price hikes. In an open letter in late May, the company's U.S. president, Joe Erlinger, countered criticism that menu prices had doubled, saying they had only increased by 40% since 2019.
Still, the company has been taking steps to attract price-conscious customers: On Thursday, McDonald's rolled out a new $5 value menu for mobile app customers, and on Friday it was offering free fries with purchases of $1 or more.
Darden has taken a different strategy to attract customers, relying on TV advertising and keeping overall prices below the rate of inflation to lure them in. The company reported fourth-quarter results that showed same-store sales growth was flat and revenue missed expectations, but profits beat Wall Street expectations.
Mr. Cardenas said the company has been dealing with a “consistently weakening consumer environment” and increasing price cuts and marketing pressures from rivals, even as executives boasted that its restaurants are outperforming the overall casual-dining division.
Darden shares were up more than 1% in morning trading on Thursday after the company's shares fell 6% this year, dragged down by concerns about the consumer environment.
