Restaurant

‍Introduction 

Cardlytics helps brands understand and respond to the biggest trends in consumer behaviour, supported by spending insight from over 20 million UK bank accounts. 

In this report, we have analysed eating and drinking habits to understand how restaurants, from quick-service to fine-dining, as well as lunch spots, coffee shops and casual chains, have been impacted by the prolonged high cost-of-living. Are we still a nation addicted to coffee? Are pizza shops still hitting the spot with consumers? Are bakeries and burger chains suffering as many consumers look to embrace healthier choices??    

To help brands better understand how consumers are reacting to this extended period of high inflation, we’ve tackled all of these topics, analysing Cardlytics purchase intelligence data and providing insight and advice for brands on supporting and continuing to attract customers in today’s operating environment. 

Pizza shops getting the chop as consumers shift to alternative fast-food options   

Takeaway pizza chains are losing ground in the quick service restaurant (QSR) sector, as consumers continue to move away from pizza in favour of alternative fast-food options. 

Despite the average transaction value (ATV) at pizza restaurants increasing by only 11% between 2022 and 2024 (compared to a 21% rise in chicken shops and 18% at fast-food restaurants), diners have cut the number of visits to popular pizza takeaway chains by 20% over the same period.

This is significantly greater than the 4% reduction in visits to fast-food restaurants and 7% drop seen by chicken shops during the same period. It shows that, despite the widely reported impact of inflation on spending habits and a general rise in ATV across the QSR sector, consumers haven’t been entirely deterred from discretionary spending on the odd takeaway.

In fact, fast-food restaurants saw a 13% rise in spending between 2022 and 2024, whilst chicken shops saw an 11% increase. Comparatively, takeaway pizza restaurants saw a reduction in spending by 12%.

It appears, therefore, that despite tightening purse-strings, consumers are reluctant to forgo spending money on fast-food and chicken shops but are willing to sacrifice the occasional pizza. 

Why might this be? Perhaps it’s due to the increasing availability of similar quality products at more affordable price points in supermarkets, or it could be as a result of a growing variety of fast-food and chicken shop chains in the UK market. In any eventuality, pizza shops face a unique set of challenges that they must overcome, if they are to regain market share in the QSR sector. 

Cardlytics analysis

For pizza brands, there is a clear task at hand to ensure that they remain competitive in an increasingly busy QSR sector.

Consumers are faced with a growing number of takeout options to choose from, with chicken shop and fast-food chains from around the world recognising the opportunity available in the UK market. The rollout of up-and-coming fast-food restaurants is a clear indication of the growing choice consumers have from chains that,  when compared to 10 years ago, had little to no market presence in the UK.

In tandem, established players in the QSR sector are recognising the need to deploy more creative and effective marketing campaigns to gain a competitive edge and drive engagement amongst consumers. This has been the case amongst fast-food and chicken shop chains, where spending amongst consumers has continued to increase despite rising inflation, whereas pizza chains have suffered a significant reduction in footfall by 20%.

The data shows that, despite the macroeconomic headwinds, there is a sustained appetite for takeaway food in the QSR sector. Marketers should therefore emphasise rewarding consumers with the best possible deals to gain a competitive advantage in what is, and continues to be, a heavily saturated market. 

Coffee and quick ‘city lunch’ culture on the wane, while on-the-go bakeries see boost as cost-of-living continues to bite

As the cost-of-living continues to remain high, and disposable incomes still stretched due to unrelentingly high-interest rates, many commuting office-goers are being forced to modify their spending habits.

In fact, the broader macroeconomic challenges have had a significant impact on ‘city’ lunch brands, causing prices to hike. The knock-on effect of this on consumers is clear to see, with the average costs per transaction up 5%. This has caused consumers to seek cheaper alternatives, leading to a 9% reduction in the number of transactions made across the year, whilst overall spending has reduced by 4%. 

A similar trend can be seen in spending at high-end coffee shops, a sector which saw a 14% drop in visits. This is a higher figure than the 9% drop in visits to chain coffee shops – which saw a 5% reduction in total customer spending.

Interestingly, this is not a trend that has affected the on-the-go bakery sector, with companies such as Greggs experiencing a 4% rise in spending for the year. This did not correlate with a proportionate increase in trips to such bakeries, which saw a 1% rise. This suggests either loyalty to the brands as a result of their consistent pricing, or perhaps resulting from customers shifting from the more expensive coffee or city lunch spots to more cost-effective alternatives. 

When considered together, these trends tell an interesting story of consumers becoming increasingly conscious of their spending and subsequently moving away from more costly options to more affordable choices. 

It is certainly feasible these statistics reflect a wider shift in habits, with many commuters now opting to bring in their own lunches and source cheaper coffee options (perhaps within their offices), and typically buying food and drink at more affordable dining spots where necessary. This remains a key trend to keep an eye on as the post-covid, hybrid working era is challenged by ‘return to the office’ protocols introduced by companies and the public sector. 

Cardlytics analysis

Commuters and city workers are key consumers for coffee shops, inner-city lunch spots, and on-the-go bakeries, so it’s important to keep an eye on how these trends continue to develop and what impact these changes may have. 

Crucially, for these brands – who regularly interact with their customers – data will be key. If the behaviours of their customers are changing, what do those changes look like? Are people opting only for a sandwich and sourcing their coffee elsewhere? Perhaps customers for whom a pastry was a daily purchase are now only buying them once-a-week as a treat? Looking at an individual’s data, and using that to create tailored offers, not only shows that your brand cares, but also helps to put the right offer in front of them at the right time. 

Then, by offering incentives to customers on the days of the week they are most likely to visit the store or buy a particular item, consumers are far more likely to become repeat customers. This  becomes particularly pronounced as people continue to limit their spending in the era of high inflation and an ongoing cost-of-living crisis.

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Casual and upscale dining both drop off while burger chains see a hike 

Dining out is often one of the first areas of discretionary spend households look to reduce when their finances are stretched. With interest rates still at a high threshold, disposable incomes are still being spread thin for many. 

It is with this backdrop that the number of transactions within casual dining restaurants has dropped 13% year-on-year. This followed a small 2% growth in transactions between 2022 and 2023. 

However, despite the decline in trips to restaurants this year, consumers who are eating out are spending 7% more per transaction compared with the same time period in 2023. This is likely as a result of inflation hiking prices, increasing the average spend per transaction. Overall, casual dining has seen a 7% decline in  total spend by consumers. 

As purse-strings continue to tighten, upscale dining has seen a significant decline of 11% relating to trips to restaurants. With consumers clearly being more cost conscious than in recent memory, many appear to have reduced visits to more upscale restaurants in a bid to save money.

On the flip-side, burger chains – such as Honest Burger, Patty & Bun and Byron – have seen a massive 17% hike in transaction volume in the last 12 months. This has coincided with a 6% growth in the amount spent per transaction on average, contributing to an overall 12% growth in spend in burger chains this year. 

The reasons behind this could vary, numerous establishments have launched their own vegan and healthier-option burgers and  menus, for example, as well as the restaurants potentially representing a solid ‘middle ground’ for households, or an alternative between fast-food and fine-dining. 

Cardlytics analysis

The eat-in dining industry, from casual to  up-market, is still being impacted by the ongoing high cost-of-living. Whether it’s more regular purchases like a quick coffee or lunch, or something more meaningful, like a celebratory meal, customer scrutiny on spend remains high. 

For brands to continue to navigate this challenging  economic environment, clever use of data will be instrumental. This is particularly important for brands  which interact  frequently with customers,  such as coffee shops and quick service restaurants. For these brands, it is now important to  meaningfully consider what their customer data is telling them.  Which habits do their customers have? Is it a lunchtime treat every Friday? A sweet treat with their coffee as a midweek pick-me-up? 

Inspecting an individual’s data to create tailored offers shows that you understand and care about giving your customers the best  value for the brands on which they want to spend money . For most brands, the key will be offering introductory discounts to entice new customers , and longer-term personalised rewards to secure return visits.

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Methodology

Cardlytics analysed spending trends based on its purchase intelligence data, which covers over 20 million UK bank accounts. The periods include January and February spending from the last four years (2024, 2023, 2022, 2021).  

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After months of suggesting inflation was a transitory phenomenon, Treasury Secretary Janet Yellen finally admitted what restaurant brands have known for some time. Inflation isn’t going anywhere any time soon. And it’s not only impacting restaurant prices, it’s impacting restaurant consumer trends in measurable ways.

Key takeaways:

• Check sizes are higher this year, likely driven by price increases due to inflation.
• Customer frequency is down across all restaurant segments.
• Online orders are slightly smaller compared to in-store orders in limited service restaurants, suggesting a change in consumer behavior.
• Higher customer counts are obscuring the drop in customer frequency for loyal customers.

If the current inflation dynamic persists in 2022 as predicted, restaurant brands need to find new ways to increase customer frequency for loyal customers or increase margins to stay ahead of the inflationary curve.

The prevailing narrative about restaurant trends

Early in the pandemic, government restrictions and changes in consumer behavior devastated the restaurant industry. Restaurant share of consumer spend dropped nearly 70% in 2020.

Restaurant spending made a comeback in 2021, but there’s still a ways to go to hit pre-pandemic projections. Major fast-food chains like McDonald’s and Taco Bell reported sales well above 2019 and 2020 levels but at a high level, it appears the great restaurant recovery is well underway. 

But, there’s more to current restaurant consumer trends than meets the eye. The impact of inflation on the economy isn’t equal across all sectors and restaurants are feeling the pinch in a major way. In addition to spiking ingredient prices, supply chain snarls and labor shortages are making it increasingly difficult for restaurant brands to maintain their profit margins.

Cardlytics’ insights into credit card spending paints an interesting picture of restaurant consumer trends. Here’s what we discovered about the true impact of inflation on the restaurant business. 

Key takeaway #1: Inflation is present in the form of higher average check size.

Average check sizes are up across the board, increasing more than 6% for pizza and QSR brands. Casual and full-service dining saw the largest increases at 10.4% and 10.9% respectively. 

That corresponds to Bureau of Labor Statistics data showing a 5.9% rise in prices at quick serve restaurants (QSRs) and a 7.1% increase in full-service restaurant prices. 

Key takeaway #2:  Online check size was down compared to 2020 for limited service restaurants (LSRs).

Oddly enough, our insights show LSRs are seeing a decrease of nearly 5% in online check size compared to 2020, even though prices are the same for customers who order online versus in store. This restaurant consumer trend has gone unmentioned by the national trade media. 

While the exact reason for the decline isn’t clear, one possible explanation is that as more people return to the office for work, they are only ordering for themselves versus ordering for the family when everyone was in work-from-home mode. 

Another possible explanation is consumers are savvier about their online orders after months of ordering takeout. They know what they like, and instead of sampling new menu items, they stick to tried-and-true favorites. 

Also, staff and product shortages are causing many restaurants to cut menu items. Diners may choose to substitute another menu item when eating in, but those who order online may opt to supplement missing menu items with something from their pantry or fridge. 

Key takeaway #3: Higher prices are offsetting the drop in customer frequency. 

While higher average check sizes are cause for celebration, current restaurant trends are not entirely positive. Compared to pre-pandemic levels, customer frequency is down between 10 and 20% across all restaurant segments. Unique customers are also down across all segments compared to 2019, except for QSRs.

While the impact of these declines is partially offset by higher average check sizes, it’s a potentially devastating development for long-term recovery. While repeat customers only represent about 15% of the customer base, they generate roughly a third of the revenue.  Restaurant brands with a robust omnichannel strategy are best positioned to win new customers and compete for their share of spend.

Bracing for 2022

While it’s impossible to predict the future, Federal Reserve Chairman Jerome Powell says surging inflation will continue this year and likely won’t dip until the end of the year. JPMorgan is predicting a labor shortage lasting three or more years, and the supply chain crunch is expected to last through the second half of 2022.

It all adds up to more rough waters for restaurant brands as consumers cut their spending in response to higher prices. If current dynamics persist, restaurants need to know where they can either drive more frequency or higher margins. Well-targeted advertising solves for both by shifting brand and traditional media spend to highly targeted performance marketing that encourages frequency among the most valuable customers while reducing the bite that advertising takes out of margins. 

One way for marketers to combat soft purchase behavior caused by inflation is to identify those customers who are most sensitive to price and who are seeking value. Cardlytics uses valuable insights to better identify, target, and convert ideal customers through their trusted bank channels by providing those customers with compelling, brand-specific digital rewards to drive incremental and profitable transactions.

By connecting the right people with the right rewards, Cardlytics helps brands strengthen their relationships with their most valuable customers and win new customers from competing brands. Get in touch today to see how Cardlytics can help weather the effects of inflation in 2022.