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How COVID-19 is Affecting Restaurant Prices

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Covid-19 report has an immerse impact on the daily economic activities in America. As people and governments and public health experts stress the importance of social distancing as a way to stem the spread of the contagion, restaurants are seeing major declines in patronage.

COVID-19 report has an immerse impact on the daily economic activities in America. As people and governments and public health experts stress the importance of social distancing as a way to stem the spread of the contagion, restaurants are seeing major declines in patronage. And yet while some people responded by cutting back on takeout food, others actually started visiting their favorite drive-thru or curbside pickup more often.

Considering data from PriceListo's database given a set of five restaurant chains in each of the three categories using specific criteria. After analyzing the data; it appears that to date the pandemic has done nothing to lower prices per se, but for four chains whose average price had been steadily increasing before the pandemic, those trends were nipped in the bud - no increases have occurred in the last month.

To break down little; provides pricing information for scores of businesses by location, including over hundred restaurant chains – the price of an average item as well as the price of popular individual items. We checked out five of the major players in each of the three categories:

Fast food: McDonald's, Burger King, Wendy's, Taco Bell, Subway
Fast casual: Moe's, Panera Bread, Shake Shack, Five Guys, Panda Express
Casual dining: Applebee's, Denny's, IHOP, Buffalo Wild Wings, Red Lobster

To get a sense of how their pricing compares to one another in general, we chose January of 2020 as the most recent month that would be free of any pandemic-related effects. Whether because of the pandemic or in spite of it, as of April, Fast Casual and Casual Dining were similar in terms of largest three-month increase in average price. But this was far from a steady uptick, month after month. We also measured the volatility of prices for each chain, in other words, the average change in price in absolute terms from month to month. Fast Casual and Casual Dining also saw wider swings in price from month to month than did Fast Food. This solidifies the belief that Fast Food really is the most consistent and budget-friendly restaurant type.

Breaking this down a little further, the performance by chain has not surprisingly varied greatly. Here we looked at the change from February to April, because this was the period of greatest volatility (possibly suggesting that the pandemic response was driving that volatility). Nine chains had seen their average price increase, two of these sharply (Red Lobster and Five Guys). Three others have held the line with no change in price over these two months.

With all of this in context, let’s look more closely at the performance of the five previously mentioned price leaders across the three segments (Subway, Burger King, Panda Express, Moe's, and Red Lobster.) When we look at trends over the last four months, it’s interesting to see that, not only do these four chains apparently have the marketplace power to sell more higher priced items, that power had been growing. (For the sake of simplicity the data for the other chains aren’t shown, but their trends had largely been flat before March and April and have remained flat afterward.) Each of these four experienced significant increases in that average price heading into the period when the pandemic started making itself felt. Equally interesting, however: each of those four upward trends softened in April of 2020, arguably the first full month for people to react to the changes imposed by the pandemic. That previously 15-cent decline in Panda Express’s average price came on the heels of an upward surge over the prior months.

There’s no smoking gun when it comes to identifying the pandemic as the driver of pricing changes, but then, that would be really unexpected given so much in the churn that we can’t account for. Six of the eight states (including at least one in each group) saw virtually no change in Burger King’s average item price compared to the prior month. The other two saw declines. Still, one could argue that there’s a hint of a correlation: the most extreme drop-off in Burger King’s average price took place in Illinois, a first-tier state in terms of restrictions. The other significant decline happened in New Jersey, a second-tier state.

Several chains are now offering box meals and family-sized meals in an effort to counter the impact of the pandemic on their sales. For example, Taco Bell recently added an at-home taco bar to their menu, at a price of $25. Shake Shack is offering their burgers in an 8-pack for $49.The two chains whose upward ascent was most severely curtailed in recent months, Panda Express and Red Lobster, have been particularly aggressive here. Panda Express’s Family Meal includes, among other item, three entrees, starting at $20. Red Lobster’s Family Meal packs serve four for $27.99, including free delivery.

Each of these new, pricier items were introduced in April, or the end of March at the earliest. We noticed that even with the introduction of these higher-end items, the average price of most of these restaurants remained on the same path as it was before, so it's unlikely they've had much impact on the average price.

There’s clearly no way to predict future pricing trends from all of this; that would be too big a challenge even without all the continuing uncertainty about the pandemic and its impact on the economy and our lives more generally. But taken a whole this analysis does indicate two things. First, while restaurant prices may not face any widespread downward pressure, the pandemic may be causing diners to balk when it comes to continued increases in spending on higher priced items. And second, smart restaurant chains will continue searching for ways to change those hesitant diners’ minds.

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Name: Pricelisto
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Organization: Pricelisto

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Source: MarketersMedia

Release ID: 88969318

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