New York (CNN) 鈥� McDonald鈥檚 and other fast food chains . So much so that you may want to consider going for a slightly slower burger. Or at least, that鈥檚 what Applebee鈥檚 wants you to think about.
鈥淵ou can get our burger for $9.99,鈥� John Peyton, CEO of Applebee鈥檚 parent company Dine Brands, told CNN in an interview. With that in mind, 鈥渨hy would you take a $10 burger 鈥� that you can eat in a bag out of your car?鈥�
If Peyton鈥檚 sales pitch resonates with customers, it could help convince diners to eat at sit-down restaurants, something they might otherwise see as an indulgence.
For a while, restaurant customers were trading down 鈥� swapping out expensive meals for cheaper ones, but still dining out. Now, some are responding to higher menu prices by trading out entirely: Instead of opting for cheaper restaurants or meals, and spending less when they do go out.
That means that restaurants have to battle it out for these cost-conscious consumers. And now, it鈥檚 not just burger chain against burger chain.
Because fast food joints have been hiking up prices in recent years, dine-in spots like Applebee鈥檚 can run promotions that end up costing about the same as a fast food lunch 鈥� giving them a chance to try to steal those customers away.
The overlap offers 鈥渁 new opportunity,鈥� according to Peyton. Lunch at McDonald鈥檚 now costs about the same as lunch at Applebee鈥檚, where you can sit at a table and have your meal delivered by a server. Pointing that out is a new way to bid for customers.
Applebee鈥檚, which has seen sales slump as lower-income customers pull back, is offering deals and hoping the prices will speak for themselves. Chili鈥檚, on the other hand, is making the comparison more explicit.
For them, and the fast food chains they鈥檙e now competing against, the stakes are high.
A smaller pie
Years of price hikes have听, pushing restaurants to fight over fewer customers, according to Henkes.
鈥淚t鈥檚 a smaller pie today than it was a year ago,鈥� he said.听鈥淵ou鈥檙e competing for a share of a smaller market. And so it is more competitive.鈥�
Fast food prices, in particular, have shot up. 鈥淔ast food has gotten really expensive,鈥� Henkes said. 鈥淐ertainly, relative to where it was 12 to 18 months ago, and also in comparison to casual dining sit-down restaurants right now.鈥�
In the 12 months through March, not adjusting for seasonal swings, prices at fast food and fast casual restaurants went up 5%, according to data from the Bureau of Labor Statistics. In that period full-service menu prices went up 3.2%, and grocery prices ticked up 1.2%.
A few years ago, McDonald鈥檚听. But now, it鈥檚 struggling with lower-income customers.
CEO Chris Kempczinski said听听that 鈥渢he battle ground is certainly with that low-income consumer.鈥� The following month, CFO Ian Borden conceded听听that 鈥渋t鈥檚 a challenging consumer environment.鈥�
The chain is working on a $5 menu to win over those customers, .
Things aren鈥檛 much better over at Applebee鈥檚.
Sales at US Applebee鈥檚 locations open at least a year听slumped 4.6% in the first quarter. In that period, customers who earn $50,000 a year or less visited less often, and spent less when they did, Peyton said, adding that the demographic makes up about 45% of Applebee鈥檚 customers.
鈥淔or several quarters鈥� we鈥檝e been asking ourselves, when will we see the impact of inflation, and the economy in general, and interest rates, on on our guest,鈥� he said. 鈥淲e really began to see it in the first quarter.鈥�
He added that 鈥渨e think it鈥檚 going to be a fight for share of wallet and market share all year.鈥�
Fast food as a foil
With fast food prices high, sit-down restaurants can make a case for themselves.
People have taken their fast food price grievances to social channels, . Chili鈥檚 has been paying attention.
鈥淥ur social media team has been watching the conversation that the consumer is frustrated by fast food prices,鈥� said Kevin Hochman, president of Chili鈥檚 and CEO of its parent company, Brinker International, during an April analyst call. In response, Chili鈥檚 decided to run ads that 鈥渦se fast food as a foil,鈥� he said.
The chain said in an April press release that it was adding a new burger 鈥� which it described as having 鈥渢wice the beef of a Big Mac and flavors fast food lovers will recognize鈥� 鈥� to its 鈥�3 for me鈥� value menu. For $10.99, customers get the burger plus an app and a drink.
On X, Chili鈥檚 , and promised rewards to those who said yes. Chili鈥檚 also ran video ads comparing its food favorably to fast food burgers.
But it might not be that easy. Getting people to go to Chili鈥檚 instead of McDonald鈥檚 may be a stretch, said David Henkes, a senior principal at Technomic, a food industry research and consulting firm.
One problem for chains like Chili鈥檚 and Applebee鈥檚 is that they鈥檙e not so much competing on price, as they are on time.
鈥淧eople go to sit-down restaurants, generally speaking, for different occasions, than they go to fast food restaurants,鈥� he noted. You might expect to spend an hour at a Chili鈥檚 or an Applebee鈥檚, and breeze right through a McDonald鈥檚.
Still, campaigns like Chili鈥檚 can help communicate to customers that these days its food is relatively cheap.
鈥淧lanting that seed that, 鈥楬ey, we鈥檙e a good value,鈥� I think is a good message to have,鈥� Henkes said.
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