FRESH TAKES ON BIG IDEAS

What if restaurant leaders are thinking about value in ways that are setting them up to fail?

After years of steady gains, spending on food away from home is plateauing—no surprise given recent economic uncertainty and pressure on household incomes. Plenty of restaurant leaders reasonably assume that winning diners back comes down to lowering prices to increase the perception of value.

There’s no question that consumers are fed up with price increases. But restaurants’ obsession with price as a proxy for value is becoming a race to the bottom—one defined by more marketing promotions but less loyalty, worse food, and far-from-inspiring restaurant experiences. Meanwhile, restaurants seem to have accepted a false narrative that reducing costs means you must serve smaller portions or lower-quality meals.

Instead, there’s an opportunity to deliver a great experience, a consistent product, and moments of delight and innovation that improve customer perceptions of value even in the absence of big price adjustments. The same work required to do that—strengthening fundamentals and rethinking how the system operates—is also what will position restaurants to succeed in the years ahead.

Over the past several years, restaurants have been operating under extraordinary inflationary pressure. This has led them to stop asking, “How do we create the most inspiring experience possible?” and instead start asking, “How do we survive?” During the COVID-19 pandemic (and for years after), food costs increased, and many operators passed those increases onto consumers. Food inflation may have now stabilized, but restaurants have not regained their footing, and procurement strategy in the average restaurant still isn’t as strong as it needs to be. Many operators remain stuck in manual, backward-looking purchasing processes. 

Leading restaurants are investing in digital and AI-enabled procurement tools and advanced analytics that link demand forecasting, menu engineering, and supplier selection—providing earlier warning signals, more cost transparency, and far greater flexibility as conditions change. For example, an AI-powered procurement tool might show that swapping one ingredient or supplier for a signature dish could meaningfully improve profitability, freeing up capital to invest in premium items that elevate the overall menu. Together, these tools can help protect margins even if food prices rise again.   

“Price as a proxy for value is becoming a race to the bottom—one defined by more promotions, worse food, and less-than-inspiring restaurant experiences.”

Labor is another area where costs have challenged operators. Wages are higher, turnover remains elevated, and staffing models built for a different era are being stretched thin. Many restaurants are trying to do more with fewer people, often without fundamentally rethinking how their production engine really works and how staffing affects customer experience. In many cases, the same number of people are now expected to manage two production engines at once—one for high-volume takeout and mobile orders and another for on-premise consumption—and at a faster pace. Trying to run those two experiences through a single production engine is where a lot of things start to break. From the guest’s point of view, it shows up as long waits, wrong orders, and uneven service, even when demand looks manageable on the surface. In these instances, value perception tanks, even if prices haven’t changed.  

Today, the capital required to redesign production and labor systems is too high for many operators. But those up-front costs are starting to decrease. As robotics become more affordable and AI more capable, there will be a tipping point where automation plays a much bigger role in improving order accuracy and consistency. Above the food assembly line, smart cameras could detect whether the right ingredients—a beet, not a bell pepper, for instance—were added to a mobile-order customer’s bowl. That takes pressure off the worker, allowing them to focus on other parts of their job that are more fulfilling and can better satisfy customers.

Amid efforts to achieve greater efficiency, it’s also important not to neglect more nuanced elements of the restaurant experience that can directly affect a customer’s perception of value. Consider restaurant theater: the aromas, commotion, and sights that signal food has been crafted with care. In a bakery, it’s the smell of bread coming out of the oven. In a coffee shop, it’s hearing the coffee bean grinder or the hiss of a milk steamer, and seeing a barista shake cold, mixed drinks like a bartender. Strip too much of that away through automation and more efficient operations, and consumers may start to wonder what they’re paying for, even if the product itself hasn’t changed. The challenge here is that half of consumption now happens through drive-through windows or mobile pickup, meaning many diners never sit down or linger long enough to experience that theater. And yet even brief exposure may shape consumer perception and willingness to pay. 

Consumers are willing to pay for food when they consistently get what they want, how they want it, when they want it. The restaurants that succeed over the next several years won’t be fixated on short-term price and menu architecture or cost management. They’ll be the ones willing to ask harder questions about who they’re trying to serve, what experience they’re really offering, and which outdated axioms they need to unlearn to get there.

—Edited by Alexandra Mondalek, editor, New York

ABOUT THIS AUTHOR

Ben Mathews is a senior partner in McKinsey’s Cleveland office and the leader of the firm’s restaurants group.