Winners and losers of the restaurant industry in 2024

Casual dining in 2024 has been dramatically reshaped by inflation, changing consumer priorities and fierce competition between fast food giants and convenience stores.

With restaurant prices rising 3.6% over the past year, according to the Labor Department’s Consumer Price Index (CPI), many consumers have reassessed their eating habits and chosen to prepare more meals at home. Although grocery prices were generally more economical, they also increased by 1.6% during this period.

This coincidence of factors has resulted in a year of mixed results for the casual dining sector. Some brands have successfully navigated these challenges, while others have struggled to adapt. However, one constant has emerged: Value remains paramount. As 2025 approaches, restaurants will need to offer compelling value propositions to succeed.

“We’ve seen a value-oriented consumer, but one that’s looking for innovation,” RJ Hottovy, head of analytics research at foot traffic analytics firm Placer.ai, told Quartz in an interview.

To entice price-conscious diners, many chains engaged in fierce “value wars” proclaims aggressive campaigns. Chillies (EAT+0.19%)for example, successfully capitalized on this trend with his popular “3 for me“deal. That’s how it’s been McDonald’s $5 meal dealwhich also turned out to be very successful.

But consumers are not just looking for the lowest prices. They are also thirsty new experiences and menu items. Hottovy notes that chains can suffer ChipotleCava (CAVA-2.31%), and Sweetgreen (SG-1.39%) has driven sales by introducing new menu items and flavors. Chipotle’s (CMG-0.97%) reintroduction Chicken Al Pastor and Beef Barbacoa, for example, proved to be a significant sales boost. McDonald’s (MCD-1.09%)Taco Bell (YUM-1.07%), and Wendy’s (WHEN-1.33%)are also good examples of this approach, offering cheaper deals along with limited-time deals. According to a counter report, the three chains are considered more affordable options than groceries across income groups. Especially Olive Garden (THREE-0.32%), and Longhorn Steakhouse, have also seen increases. The restaurants are among this year’s winners of casual dining.

Earlier this year, McDonald’s collector cups became so popular customers started selling them on third-party websites such as eBay for as much as $100. Wendy’s SpongeBob themed bundlewhich contained one Pineapple Under the Sea Frostyalso resonated with consumers, despite online criticism that the promotion did not live up to the hype (aesthetically, that is). Meanwhile, Taco Bell’s Decades menuwhich brought back classic items since the chain’s inception in 1962, leveraged its strong brand identity to attract nostalgic diners.

The winning formula – compelling value and innovation – has not worked for all chains. Higher food costs, declining foot traffic and rising labor costs have created a difficult operating environmentespecially for smaller and regional chains. Many face an uphill battle in the face of these economic headwinds.

According to Hottovy, we can expect to see more bankruptcies in 2025especially among chains that have not been able to adapt quickly enough. Red Lobster, for example, has faced significant challenges, with experts question its long-term viability and if it can rekindle his brand and offer more value to customers. Since stemming from Chapter 11 bankruptcythe seafood chain has implemented several changes, i.a discontinue its $20 Endless Shrimp promotion and cuts down on the menu. Under Managing Director Damola Adamolekun, and a 70 million dollar budgetthe chain plans to increase hiring and spruce up its restaurants with better lighting.

Meanwhile, TGIF Fridays has also navigated a challenging year, with sales stagnate and foot traffic falls since the start of 2024. The once-beloved American-themed diner has struggled to compete with more modern establishments like Chili’s, failing to attract younger customers despite various sales promotion efforts.

As traditional chains struggle with declining foot traffic, chicken is among the big winners in casual dining this year. Chains like Raising Cane’s did particularly well, Hottovy notes, likely due to the growing tendency for consumers to choose menu items they perceive to be. healthieroften swap chicken for red meat. Chicken also presents one more cost effective option for restaurants compared to beef products. Taco Bell, for example, recently introduced chicken nuggets as a limited time offer.

The beef industry has faced particular challenges, particularly the impact of the McDonald’s E. coli outbreak, in which sliced ​​onions sickened hundreds of customers. This event significantly affected McDonald’s, which according to Barclays has almost half of the burger market, leading to a decrease in customer traffic. While the introduction of the $5 meal deal in October helped mitigate the impactMcDonald’s acknowledged the long-term consequences of the outbreak. To speed up the recovery process, the company announced a $100 million investment in marketing and franchisee support in November.

In addition to the pressure within the restaurant industry, convenience stores have proven to be formidable competitors, with consumers turning to retailers, e.g. Aldi and Trader Joe’s for their grocery needs. With food prices still up 2.4%, according to CPI data, these options offer a more appealing alternative for budget-conscious families, especially those looking for items that don’t carry a high price tag. Walmart (WMT-1.02%) can also be grouped in this category. The retail giant, along with Aldi and Trader Joe’s, has seen massive gains this year from private label offerings.

In 2025, the key to thriving in the casual dining sector is likely to continue to be a combination of value and innovation. Chains that offer affordable options with exciting new products, flavors and dining experiences are likely to experience success. The growing interest in unique sauces and new menu items, such as McDonald’s McRib, along with its half-gallon jug of McRib sauceindicates a strong appetite for fresh food experiences. Collaboration with entertainment brands – e.g Starbucks’ recent move in China – is also likely to play a significant role in capturing and keeping customers engaged.

“As we’ve seen in 2024, simply attracting customers with a good deal is not enough,” Hottovy said. “To keep them coming back for more, restaurants will have to offer innovation on top of that.”