How inflation is impacting the way we eat, when we go to restaurants and how we tip

Among the forces at work on restaurants these days is, of course, inflation. People are changing their spending habits with elevated prices afoot, and that includes eating out or getting takeout. But there’s also the challenge restaurants face to hire enough workers. And there are strong opinions on tipping at restaurants and new restaurant-going habits that have stuck since the pandemic.

All of this adds up to a new landscape. For a progress report on the industry, we turn now to Toast, which is out with a new restaurant trends report. Kelly Esten is chief marketing officer there. She spoke with “Marketplace Morning Report” host Sabri Ben-Achour. The following is an edited transcript of their conversation.

Sabri Ben-Achour: Restaurant prices are up about 4% from a year ago, according to the consumer price index. And, of course, they rose by much more than that the year before and the year before. How are people responding to that, from the data that you all see?

Kelly Esten: We explored 20 U.S. cities and found that consumer spending at quick-service restaurants saw a noticeable shift toward breakfast and away from dinner and late-night transactions. So what we’re really seeing is consumers going more toward those convenience moments, using that as kind of the pickup in their day, and spending less time and money out in the evenings. You know, as consumers’ habits are changing and as they’re paying a little bit more attention to their wallets, we’re seeing them really move toward those convenience moments. So breakfast on the way to work or picking up a quick lunch while they’re out and about or in the office is really the moment they’re choosing to spend their restaurant dollars on.

Ben-Achour: Tipping is a very hot topic. Both presidential candidates have flirted with policy proposals to eliminate the income tax on tips. But a number of states are considering ending the tip credit. That’s where restaurants can use tips to cover part of a waiter’s minimum wage so they don’t have to sort of pay for it themselves. Do you find any changes that could illuminate those policy debates?

Esten: You know, we’re seeing tipping overall be flat. And we do see different trends in tipping across different states. So average tips across the country were about 18.8% in Q2. And you see that more in full-service restaurants than quick-service restaurants. California is one of the lowest tipping states. They have a 17.3% tip across all restaurants, which is a slight dip from 17.4% in Q1.

Ben-Achour: Does having a view onto how tipping is shaking out across the country affect how you personally decide to tip?

Esten: As a person who works all day every day with restaurants, I tend to be a big tipper. That’s where I like to be. But what we see is that people’s behavior in tipping hasn’t really changed. I think our average person who’s interacting with restaurants every day is really making decisions based on their own personal experience. It’s hard for them to keep track of everything that’s going on with tipping and policy in restaurants.