How and Why Operators are Weaning Themselves Off Unsustainable Discounting Practices

The quick-service value menus were perhaps the most visible evidence of the trend.

Yet as signs abounded that we were plunging into a true recession in 2007, it became increasingly difficult to find a national restaurant chain that wasn't offering discounted deals. And soonafter, nearly every operator, including single-unit independents, believed he or she needed to reduce prices or offer deals to stay afloat.

In some ways, this is an old, old story.

"This is what we go through every time the economy slows down," says H.G. Parsa, Ph.D., FMP, Barron Hilton chair in lodging and hospitality management professor at the Daniels College of Business at the University of Denver in Colorado. "For example, '08, '09 and '10: People had nothing to do but compete on price because basically the people who go to restaurants are using their disposable income. During these years they had limited money to spend, so they had to make sure they were getting value for their money."

And in some ways, this is a new game. In recent years, it seems restaurant consumers were the only ones in the food business who became accustomed to paying less for more. When your costs go up and your prices go down … well, you are only asking for big trouble.

According to the National Restaurant Association (NRA), in 2011 wholesale food price inflation was more than 8 percent, the highest rate in three decades. In 2012, it was just below 2 percent. The NRA is forecasting it at around 4 percent for 2013.