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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With inflation at an all-time high, have consumers shifted their dining behaviors? Cardlytics has the purchase data to uncover the most relevant insights within the Restaurant category and beyond.

Does Third Party Delivery’s continued growth indicate a more permanent post-pandemic prioritization of ease & convenience?

• Fast Casual category has been declining since their pandemic peak
• Upscale Dining is experiencing minimal decline vs. pre-pandemic
• 3rd Party Delivery is the only category with growth

Casual Dining bucks category trend when it comes to in-restaurant dining.

• While in-restaurant Casual Dining hasn't returned to pre-pandemic levels, it is the only category growing YoY (up 2.25 pts since 2021).
• Fast Casual in-person dining continues to fall; 2022 was down 3.4 pts from 2019.
• Online trip share has been growing across categories YoY – but at Fast Casual (+1.76 pts) and, interestingly, Upscale Dining (+1.29 pts) in particular.

Consumer shopping behavior is more unpredictable than ever, but restaurant brands can rely on performance marketing to help drive direct sales both online and in-restaurant. No matter where your customers are eating, Cardlytics can convert sales on behalf of your brand – and we can prove it.

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The past year has seen consumers making up for lost time when it comes to eating out, with the industry experiencing a boom as pubs and restaurants reopened. 

Cardlytics spend data across 24 million UK bank accounts showed that overall spend across the dining sector increased 22% between 2021 and 2022 as people looked to make the most of socialising post-covid. Pubs and bars saw the largest spend increase of 12031% followed by casual dining restaurants (748%), coffee shops (63%) and quick service restaurants (40%).

Despite this general uptick in eating out over the past year, total spend across the sector is still down when compared to pre-pandemic levels. 

In comparison to 2020, Cardlytics data shows that spend in 2022 is still down across casual dining (-15%), pubs and bars (-7%), coffee shops (-5%) and quick service restaurants (-2%). 

As the cost-of-living reaches a crunch point and disposable income shrinks, hospitality is often the first in the firing line. Consumers will be making difficult choices to cut back their spending, meaning brands may face further hurdles in returning to pre-pandemic spend levels. 

Competition for customers is reaching a peak, and as consumers look to prioritise essentials like grocery shopping and energy bills over a meal or drink out, how can dining brands hold their market share? 

Invest in delivery options

Between 2020 and 2021, lockdowns drove an astronomic rise in spend across delivery platforms as customers had to experience their favourite foods from the comfort of home. Cardlytics spend data shows that delivery platforms saw a 110% rise in spend between 2020 and 2021. 

However, as restrictions lifted and customers sought to eat out rather than order in, these brands struggled to live up to their lockdown success leading to a spending decline of 5% between 2021 and 2022.

But the tide is changing. With increasing numbers of customers looking to cut back spending on more ‘expensive’ meals out but still wanting to treat themselves to a ‘cheaper’ takeaway at home. 

Casual dining is already starting to see the impact of the cost-of-living and tighter budgets with Cardlytics spend data showing that total spend fell 2% in the past 6 months compared to the previous 6 months. 

Investing in delivery options will stand dining brands in good stead to capitalise on this shift, as prices creep up and consumers cut back on trips out.

Diversify your offer with cheaper, smaller items

During times of financial difficulty, consumers still want ways to treat themselves but with smaller, less extravagant items. This means people are more likely to turn to coffees and snacks rather than a full three-course meal. 

Brands should look to diversify their offer with smaller items or options, whether that be a lunchtime deal, a discounted menu or takeaway options at reduced prices. This will help to keep customers returning in the short term and show that the brand understands and can meet their new needs. 

Invest in loyalty 

As the cost of living continues to rise, we’re likely to see people shop and spend in savvier ways. Our recent consumer poll of 2000 UK adults shows that 73% of consumers are planning to shop around more for the best deals. We’re already seeing the tangible impact of this at Cardlytics with the number of dining offers activated through banking app reward programmes having grown by a staggering 784% between 2021 and 2022. 

If dining brands want to retain customers in this difficult time, they need to tap into the deal-savvy customer base by offering tailored cashback and discounts to customers to engender more loyalty and spending. 

By utilising banking channels, brands can target customers by frequency and segment and firmly establish themselves as a favourite and the go to option for a treat during these difficult times.

When thinking about dining options, convenience stores don’t automatically come to mind, but industry data shows this might be changing. According to Bluedot, 59% of customers consider purchasing a meal from a convenience store when stopping for fast food. So, we dug into our data to see if our data agreed... and surprise, it did! Here is what we found: 

Convenience is stealing trip share from quick service

Since 2019 convenience share has increased 2 points. We know this increase is due to meal-like food share instead of normal convenience snacking because (1) we excluded all pay at pump transactions and (2) gas stations with more extensive menus (pizza, burgers) have higher walk-in rates than gas stations with “standard” offerings (soda, chips).  

Customers are using convenience mobile ordering channels

Convenience mobile ordering customer penetration has increased, growing from 0.5% in Q1 2019 to 1.1% in Q2 2022. 

Quick service is losing trips to convenience and full service restaurants

Consumer convenience trip share increased 0.05% from July 2021 to July 2022.  During that same period QSR trip share went down 1.2%. FSR was the largest share stealer, shifting 1.2% from QSR.

QSR is losing loyal customers

QSR’s lost trip share comes from loyal and frequent customers. Loyal customers’ QSR trip share went down 2.3% while frequent customers’ share went down 0.4%.  Interestingly, one-timers, light & Infrequent customers altogether grew their QSR trip share by 2.1%. 

What does this mean for you?

Our data tells us that QSR needs to pay close attention to both conventional and non-conventional competitors. Specifically, special attention needs paid to maintaining loyal customers via reducing churn and boosting retention. Luckily Cardlytics can help you do just that!  Sign up to get our insights delivered to your inbox, early, and get ahead of what's happening in the restaurant industry

Key Takeaways:

• The labor shortage is hitting the restaurant industry especially hard. Nearly 7% of the food service workforce quit in November 2021 alone. Wage hikes aren’t enough to retain talented workers when inflation is driving up the cost of living. 
• Labor-saving automation and streamlined processes can have a negative impact on customer experience, and fail to drive new sales at scale. 
• Proven strategies, like restaurant discounts and deals, when combined with new technologies and precise audience targeting can get customers in the door in an on-demand manner that won’t sacrifice profitability or customer and employee experiences.

The restaurant industry was among the hardest hit when the pandemic struck in 2020. Forced closures, costly new mitigation measures, and changing consumer behavior led to the shuttering of over 110,000 restaurants. 

Restaurants are recovering from the worst of the Covid crisis, but the danger is far from over. Once-in-a-generation rates of inflation, intractable supply chain snarls, and an acute labor shortage are all eating away at razor-thin restaurant margins. 

Cardlytics analyzed current market trends and reviewed alongside our purchase insights. Here’s what we learned about the true size and scope of the problem, the effects of the restaurant labor shortage, and what brands can do to grow their margins without sacrificing the customer or employee experience.

The labor shortage and inflation go hand-in-hand

Restaurant employment is down 8% from pre-pandemic levels, a loss of over a million employees, and the Great Resignation is still picking up steam. A record 4.5 million people left their jobs in November 2021, including 6.9% of the food services workforce. 

So how did restaurants respond? By increasing wages. Roughly 60% of employers raised their wages at least twice during 2021. Nearly 30 percent of hospitality brands expect to raise them at least twice in 2022. 

But workers say it’s not enough. Wage gains in 2021 failed to offset the loss of purchasing power caused by record inflation. Even with larger paychecks, monthly budgets keep getting tighter. 

As a result, over half say they expect to find a higher-paying job in 2022, and 25 percent plan to leave the industry for another line of work entirely. It’s clear that restaurant brands are unlikely to solve their labor shortage woes with wage hikes. 

Labor-saving processes and technology may not be enough

With no end to the US labor shortage in sight, restaurant brands are investing in labor-saving technology to bridge the gap. Most major brands have already implemented streamlining solutions, and half of US restaurants plan to invest even more over the next three years. 

These new technologies run the gamut from self-service order terminals to automated smoothie kiosks and even voice-based artificial intelligence for drive-through customers. Soon, technology could even take over simple back-of-house duties like dishwashing. 

Restaurants are also turning to pared-down menus that eliminate labor-intensive entrees. The average menu item count has dropped 23 percent compared to pre-pandemic levels across all restaurant categories. Thanks to the twin pressures of the supply chain crisis and the labor shortage, it’s a trend the National Restaurant Association expects to continue throughout 2022 and beyond. 

Restaurants today are surviving, not thriving

Inflation has been especially brutal for the restaurant industry. Ingredient prices and labor costs have skyrocketed over the past year. To protect their margins, restaurants responded with modest price increases of between 2 percent and 5 percent on average,well below the current rate of inflation. 

Dining out is a luxury and a convenience, two things consumers are quick to shed when budgets get tight. This makes them especially sensitive to price increases. Instead of raising prices, some restaurants are trimming portion sizes or promoting cheaper plant-based proteins as an alternative to scarce and expensive meat. 

But labor-saving processes and price increases often aren’t enough to protect tight margins. By embracing digital promotions and advanced customer targeting, restaurant brands can look beyond brick-and-mortar economies and find innovative ways to generate new revenue. 

Cardlytics can help mitigate the effects of the labor shortage

Our insights suggest that promotional offers can be the determining factor when customers decide whether and where to eat out. Deals and discounts even outweigh recommendations from family and friends when it comes to trying new restaurants. 

What customers say about restaurant deals

• 54% say deals encourage them to try new restaurants
• 51% say deals and discounts are important to them to save money on restaurant visits
• 54% will spend more at a restaurant if they have a discount

Of course, coupons and other discounts are nothing new to the restaurant industry, but mass mailings in the current climate run the risk of over-extending locations already struggling with labor shortages. Success in driving new customers without a throttle can have a disastrous effect on customer and employee experiences, harming your brand in the long run. The other downside with mass mailers is that the people most likely to use them are the ones already coming anyway, and have already been paying full price.

Cardlytics’ customized campaigns let you precisely target customer segments you want, when you want, and for your desired locations. By excluding existing customers, you can focus your promotions on attracting new customers. At the same time, Cardlytics lets you spread the campaign impact over a longer period of time, allowing you to ramp up or down the promotion to ensure your locations aren’t overwhelmed, thus reducing the strain on your staff. As an added bonus, your restaurant stays busy, ensuring a steady stream of tips for your hardworking waitstaff. 

Get in touch today to see how Cardlytics can help you grow your customer base and boost sales with measurable incremental returns on ad spend.

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.