Gas prices have been much more affordable in 2016 than in recent years. But with a 50¢ jump (US average) in the last 3 months, you might be wondering if gas prices can affect your restaurant business.
Lower gas prices can mean a huge savings for commuters and those who travel a lot by car. Consumers tend to spend 80% of what they save on lower fuel costs on other goods and services—and about 1/5 of that savings on restaurants. But higher gas prices encourage (or require) consumers to cut discretionary spending across the board. So “luxuries” like eating out can suffer. That negative impact on restaurant business is even greater than the mild positive lift when prices at the pump fall.
Understanding these trends will help you keep ahead of the impact of fuel prices on dining.
High Gas Prices Hurt Fast Food the Most
Quick-service (“fast food”) restaurants, especially those near highways catering to travelers, are hurt the most by higher gas prices. With drivers staying home more, and likely cutting out other costs, quick-service restaurants become more optional. But, lower gas prices (and the pennies saved), encourage more travel and are a greater boost to fast food restaurants than to other types of dining.
Monitor Gas Prices Along with Your Business Costs
Ingredients and labor costs are not the only overhead to consider when setting food prices. Monitor fuel trends, considering both the cost of transporting supplies to your store (food wholesalers are already passing their fuel costs along to you), and the discretionary budget of your customers. High fuel costs may encourage you to raise prices to cover your higher supply costs, but it may hurt your sales with customers already feeling squeezed.
Location Is (Still) Everything
If your restaurant is a destination, and patrons have to drive a significant distance to dine with you, high gas prices may pose more of a problem for your restaurant business than it would for those closer to customers. Restaurants within walking distance or close to shops and businesses will seem more convenient and affordable when fuel costs are high. More remote restaurants will have to work harder and perhaps offer special incentives to attract and retain customers until gas trends turn around.
Good News for Fine Dining
Gas prices don’t tend to affect fine dining (or at least not as much). Such restaurants tend to have clientele with more disposable income. And even patrons that usually spend less to dine out may choose a fine dining restaurant for a special occasion (birthday, anniversary, graduation, etc.), so the added travel cost isn’t a consideration.
You can’t control the oil industry, and you probably can’t pick up your restaurant and move it every time the economy shifts. But if you keep your eye on the trends and keep delighting your guests, you can be a constant bright spot in the ups and downs of gas prices.
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