Inflation-weary Americans: Let’s just go out for steaks

In the three months ending May 29, sales at Longhorn Steakhouse locations for at least one year were up 10.6%.

Texas Roadhouse reported that in the first three months of the year, sales at company-owned restaurants for at least a year jumped 16%. The chain is due to report its second-quarter earnings on Thursday afternoon.

Robert Byrne, director of consumer and industry insights at restaurant consultancy Technomic, said demand for steak had been rising even before the pandemic.

But over the past few years, many people have been spending more time at home. They get meals or cook more often. When they go out, Byrne said, they want to “make it valuable.” They may choose places like steakhouses, which provide a nice ambiance and a lively meal.

Although it may seem counter-intuitive, people may also feel that their money goes further when they spend on steaks compared to fast food or fast food – especially if they visit chains like Texas Roadhouse and Longhorn Steakhouse, where portions are large and prices are high Relatively cheap.

More steaks for your buck

Longhorn Steakhouse has been on a long journey to improve its offerings, according to Ricardo Cardenas, CEO of the chain’s parent company, Darden Restaurants (DRI).

Longhorn “has made significant investments over the past few years in the quality of their food,” he said during a June phone call with analysts. One big change: “They have increased the size of most steaks.”

Big steaks make people feel like they’re getting a good deal, which is especially important with inflation soaring.

In fact, restaurant meals in general may seem like a bargain right now. While grocery prices jumped 12.2% in the year to June, unadjusted for seasonal fluctuations, menu prices grew just 7.7%, below the rate of inflation overall. At the supermarket, raw beef steaks are down 0.3% in that time — making steaks a good deal for home cooks, too.

“Consumers see the value in what we put on the plate,” Cardenas said. “For every dollar they spend at a steakhouse, they get more food.”

During a call in May with investors discussing first-quarter earnings at Texas Roadhouses, an analyst asked how inflation could affect consumer interest in the chain moving forward.

To get through tough times, “You keep your promise,” CEO Jerry Morgan replied. At Texas Roadhouse, that includes a commitment to “stack sides and keep our stakes strong.”

The strategy appears to be working.

satisfied customers

Longhorn Steakhouse and Texas Roadhouse have been tied for number one full-service restaurants in the American Customer Satisfaction Index (ACSI) Restaurant Study 2021-2022, published in June. Both restaurants scored 80, unchanged from the previous year.

In general, customers are more satisfied with their experiences at full-service restaurants, where the server takes the order and brings the food to the table, than at fast-food chains, according to the index.

My two steakhouses are in a beautiful setting, said Forrest Morgeson, director of research emeritus at ACSI and assistant professor of marketing at Michigan State University. “It’s not outrageously expensive…but it’s definitely a degree or a half higher than your fast food or fast food restaurant.”

In addition, consumers may be particularly satisfied with the larger portion sizes in these places because they see portions shrink elsewhere, Morgeson noted.

Consumer goods companies in particular have been dealing with higher costs by using a tactic known as deflation, where they charge the same amount for an item but reduce its contents or volume.

Additionally, larger portion sizes can mitigate service inefficiencies, Byrne noted.

Many restaurants are still understaffed, and overworked staff at times have to balance filling takeaway orders and delivery with serving guests in the dining room. A large steak and plump sides can help diners forgive and forget.

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