6 Reasons the Middle Class Can’t Afford To Dine Out Anymore


RyanJLane / Getty Images

RyanJLane / Getty Images

In 2023, industry publications like FSR Magazine and Nation’s Restaurant News released gloomy reports about a widespread and ongoing drop in restaurant traffic and sales. Unlike in earlier post-pandemic years, when labor shortages and supply chain woes took most of the fall, the culprit in 2023 was clear.

People simply couldn’t afford to eat out anymore, at least not as frequently, and there’s nothing indicating that will change in 2024.

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Menu prices are rising, middle-class families have less money to spend on wants like dining out and people are coming face-to-face with the consequences of an expensive tendency to over-rely on restaurants to do their cooking for them.

“Having worked with many middle-income clients over the years navigating rising living expenses, I’ve seen firsthand how this perfect storm of factors has affected their ability to dine out,” said Steven Kibbel, certified financial planner, entrepreneur, and financial advisor at Day Tradingz. “Clients who once went weekly now speak of monthly outings, if even that.”

With that in mind, let’s examine the many reasons the middle class can’t afford to dine out anymore.

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There’s Much Less Discretionary Cash To Go Around

Post-pandemic inflation has made both needs and wants more expensive, forcing many middle-class families to cut back on life’s little pleasures so they can pay rent, make car payments, put food on the table and cover all the other monthly non-negotiables. When households need to siphon discretionary funds from their budgets to pay for necessities, eating out joins entertainment as an obvious candidate for budgetary belt-tightening.

“When persistent inflation cuts into household budgets, individuals and families find themselves in a precarious house-of-cards financial situation where every dollar spent is intensely scrutinized,” said Kibbel. “When basic costs like housing and healthcare consistently rise, flexibility in monthly spending shrinks. Between higher grocery bills and additional babysitting to eat somewhere other than home, dining-out expenses mount quickly.”

Americans Have Been Overspending on Eating Out for Far Too Long

The trend away from dining out might be more of a correction than a cutback. While unpleasant, inflationary pressures have forced many households to confront the fact that they were casually spending too much on food away from home until a crisis forced them to moderate.

In 2015, restaurant sales overtook grocery spending for the first time in history. Once an occasional pleasure, restaurants had become the primary way Americans consumed food, blurring the line between essential and discretionary spending.

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Despite the financial tribulations of the pandemic and the swiftly rising prices that followed, the country refused to spend more time in the kitchen and less money on restaurants. In 2022, the height of post-COVID inflation, Axios reported that people spent 20.7% more on restaurant food than groceries — and now, many of them are paying the piper.

Had they shopped according to meal plans and cooked more frequently when times were good, they’d have more discretionary income for the occasional dinner out today.

Inflation Made It More Expensive To Be a Restauranteur

According to CNBC, it’s especially hard for restaurants to absorb cost increases without raising prices because their thin margins typically leave them with pretax profits of just 5% of sales. Just like the patrons they serve, restaurant owners are paying more for just about everything, and they have little choice but to pass those costs on to diners to stay profitable.

“Dining out has become more expensive due to many inflation-related factors, including the rising cost of food, labor, energy, transportation, rent, and other business overhead,” said Laura Adams, MBA, an award-winning personal finance expert with Finder. “Higher interest rates make it more costly to borrow money, challenging a restaurant’s profitability.”

Restaurants Raised Prices To Cope With Rising Costs

According to the National Restaurant Association (NRA) Restaurant Business Conditions Survey, nearly all full-service restaurant owners — 92% — consider rising food costs a significant challenge. Increased labor costs are not far behind at 90%, and 67% percent say utilities present a significant challenge. But they’re also spending more on the same things you’re spending more on — dishwasher detergent, hand soap, paper products, linens, laundry services, plates, silverware, etc.

Some coped by changing their menus, shortening their hours of operation, postponing plans for expansion and slimming down their staffs. But the No. 1 solution was to raise menu prices, which 89% of full-service restaurants have done.

According to the NRA, menu prices rose by 5.5% nationwide between November 2022 and November 2023, but that was the smallest 12-month increase since July 2021. Between February 2020 and November 2023, menu prices shot up by 24%, and today, going out to eat is a luxury that much of the middle class can scarcely afford.

More Restaurants Are Adding Surcharges To Make Up for Lost Dollars

The NRA survey found that 17% of full-service restaurants are adding surcharges and other fees to help offset rising prices. These add-ons, which are usually about 3%-5% of the bill, cover things like general inflation, healthcare, utilities, credit card transaction fees (which merchants typically cover) and even water.

“Plus, fees get added to restaurant orders through delivery apps,” said Adams.

CNBC reports that while diners loathe surprise surcharges even more than rising menu prices, they’re likely to become a permanent fixture.

With Tip Jars and Kiosk Prompts Everywhere, Gratuity Is a Constant Burden

Sit-down restaurants and food delivery were the two services for which most people traditionally felt compelled to tip. But now, with so-called “tipflation” pressuring consumers to give a little extra for everything from carryout coffee to sandwich shops, some diners feel compelled to dig deeper at restaurants, where they know servers make less than minimum wage and depend on gratuity to live.

“A 15% tip used to be something that servers could hope to make if they did a good job,” said Melanie Musson, a finance expert with Clearsurance. “Now, customers are expected to tip 15% for poor or mediocre service. If a server offers good service, customers feel compelled to tip 20% to 25%.”

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This article originally appeared on GOBankingRates.com: 6 Reasons the Middle Class Can’t Afford To Dine Out Anymore


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