Customers arrive at the Olive Garden location in San Antonio, Texas.
Callahan O'Hare | Bloomberg | Getty Images
Casual dining chains are gaining customers who have grown frustrated with high fast food prices, Darden Restaurants CEO Rick Cardenas said Thursday.
While Darden itself has not benefited from the shift, its competitors, such as the owner of Chili's, have Brinker International And Appleby's father Dining brands, they've reignited the rivalry with their fast-food counterparts — and it seems to be working. Chili's ran an advertising campaign calling out the Big Mac and other fast food burgers for their prices. Dine Brands CEO John Peyton told CNBC in May that Applebee's is leaning toward deals to win over fast-food diners.
On Darden's quarterly earnings call Thursday, Cardenas told analysts that industry data shows “a little bit of a shift from (quick-service restaurants) to some of these competitors” in casual dining.
As of May, full-service menu prices had risen 3.5% over the past 12 months, compared with a 4.5% increase at limited-service restaurants, according to Labor Department data. The general consumer price index rose by 3.3% during that period.
Consumers have been feeling the pinch of rising prices for more than two years, even with fast food chains, which typically benefit from tougher economic environments as consumers trade up for their cheap meals. But both full-service restaurants and grocery stores alike highlight their own value over fast-food meals, whether it's the actual price or the overall experience and quality.
particularly, McDonald's It faced backlash from customers, social media users and even House Republicans over its high prices. In an open letter in late May, the company's US president, Joe Erlinger, responded to critics who claimed its menu prices had doubled, saying its prices had risen 40% since 2019.
However, the company has taken steps to try to attract price-conscious customers. McDonald's on Thursday announced a new $5 meal, as well as free French fries on Friday with any purchase of at least $1 for mobile app customers.
Darden was using a different strategy to gain customers. It relied on television advertising and kept its overall prices below inflation to attract customers. In its fiscal fourth quarter, the company reported flat same-store sales growth and weaker-than-expected revenue, although its earnings beat Wall Street estimates.
Cardenas said the company has dealt with a “continuously weaker consumer environment,” as well as increasing discounts and marketing pressure from its competitors. However, executives noted that its restaurants are outperforming the broader casual dining segment.
Darden shares rose more than 1% in morning trading Thursday. The company's shares have fallen 6% this year, hurt by concerns about the consumer environment.
