Gas prices hurt restaurant spending at Domino’s, Applebee’s

From Domino’s Pizza to Applebee’s, restaurant chains are reporting that sales softened in March as gas prices spiked.

The U.S. war with Iran has led to an average national gas price of more than $4.50 per gallon — and contributed to a new record low for consumer sentiment. As consumers pay more for their fuel, they are trying to save money in other areas. A survey of drivers conducted by Numerator found that 43% of respondents have cut back on dining out and takeout since gas prices started climbing.

“March and April were softer than January and February, particularly with this value-oriented consumer that we saw staying home more often or dining at lower-cost alternatives, and we attribute that to gas prices specifically and the economy more generally,” John Peyton, CEO of Applebee’s and IHOP parent Dine Brands, told CNBC. “We know that when gas prices start to go past $3.50, that affects that guest for us.”

That poses an ongoing risk for some restaurant chains if gas prices stay elevated in the months ahead.

To attract budget-conscious consumers, Applebee’s is accelerating its rollout of its All-You-Can-Eat special. Starting Monday, diners will be able to eat as many shrimp, boneless wings, riblets and fries as they want for $15.99.

Across the restaurant industry, traffic fell 2.3% in March compared with the year-ago period, according to Black Box Intelligence. But not all chains felt the same crunch.

Chipotle reported surprise same-store sales growth for its first quarter despite weaker sales at the end of the reporting period.

“In March, there was a little bit of softening in our trends right around the time where the Iran conflict began,” CFO Adam Rymer said on the company’s earnings conference call in late April, adding that sales have since accelerated.

On the other hand, Shake Shack CEO Rob Lynch said that the burger chain had relatively consistent sales during the first quarter.

“We didn’t see significant changes,” he said on the company’s earnings conference call on Thursday. “We did see a little bit of softening in the back half of March, but not at a significant rate.”

And Outback Steakhouse owner Bloomin’ Brands, Wendy’s and Sweetgreen all reported that their sales sequentially improved in March compared with earlier in the quarter, largely thanks to a reprieve from winter storms. Even so, all three companies saw traffic shrink during the first three months of the year.