Chain restaurants have been reporting growing sales in the third quarter. But more sales don’t mean more customers. In fact, industry watchers are noticing that foot traffic to restaurants has been falling in recent months. That’s because as inflation eats into consumers’ budgets, many have been cutting back on their restaurant visits and eating at home more often. “You’re seeing that dichotomy where you see solid sales numbers, but at the end of the day it’s mostly … because of price increases,” said RJ Hottovy, head of analytical research at Placer.ai, which uses location data from mobile devices to estimate visits. Many restaurant chains “have out-priced their consumers,” he said. “They’re going to have to find ways to bring people back in.” Restaurants have been raising menu prices over the past few years, so they get a sales boost because each bill is higher, even if fewer customers are buying their food or people are coming in less often. The price increases weren’t enough to keep consumers from dining out at the start of this year. In January, foot traffic across fast food, fast casual and full-service restaurants, where someone takes your order at a table, were up between 20% and 31% compared to the previous year, according to data from Placer.ai. But by August, when consumers had been coping with high inflation for months, every category was in decline. In that month, traffic at fast food restaurants fell 1.2%, dipped 1.7% for fast casual and dropped 4.7% in full service eateries. Fast food traffic bounced back slightly in September and October, but fast casual and full service traffic remained negative. “We’re seeing a noticeable impact on visitation trends because of inflation,” Hottovy said. Consider the situation at Chili’s. Sales at the chain’s locations open at least 18 months jumped 3.8% in the three months ending September 28, Chili’s parent company Brinker Internationa\n \n (EAT)l reported in November — an increase driven by higher prices. Traffic, on the other hand, fell 6.6% in the quarter, and that’s not expected to change anytime soon. The company projects foot traffic will be down by mid-single-digits for the rest of the fiscal year. “We believe some guests are reacting to the tougher economic environment with fewer restaurant visits,” said Brinker CFO Joe Taylor during an analyst call discussing the results. He acknowledged that “we’ll probably see some traffic losses as it relates to the discounting side of the equation.” Some consumers may be trading down to more affordable restaurants. But many are finding that while grocery prices are also rising, eating in is still cheaper than dining out. Grocery prices are rising, but demand is still high Food is getting pricier across the board, and not just at restaurants. In fact, grocery prices are rising at a faster clip than menu prices. In the year through October, unadjusted for seasonal swings, grocery prices jumped 12.4%, according to data from the Bureau of Labor Statistics. Restaurant prices increased by 8.6%. But groceries are generally cheaper than restaurant meals. And as consumers try to stretch their budgets, demand for groceries is staying high. Sales by volume at the grocery store “have remained fairly stable,” said KK Davey, president of thought leadership for the research firms IRI and NPD. “Restaurant meals cost three or four times more” than home-cooked ones, Davey said. Because of the cost discrepancy and the menu price increases, “people are not eating out as much,” he said. “Inflation clearly drives that behavior, particularly among those who have to stretch their budgets.” Declining traffic across the industry “really has to do with the state of the consumer,” said Wendy’s CEO Todd Penegor during a November analyst call discussing the company’s third-quarter results. Customers “shifted to more meals at home during the pandemic. It’s kind of stuck there as the consumers have been a little bit more strapped,” he said. “So what you’re seeing is a little less frequency across the industry at the moment, which is putting a little bit of pressure on traffic.” What will bring customers back? Chili’s noted that its traffic dipped when it pulled back on discounts. But more deals don’t necessarily mean more traffic. “Traffic to [quick-service restaurants] offering the most deals was down 1% in the quarter compared to a year ago, the same decline witnessed by the balance of [those] restaurants,” according to a November report from NPD. In October, one promotion performed so well that it lifted restaurant traffic in fast food overall, taking it from negative to positive, noted Hottovy, and it had nothing to do with discounts: McDonald’s Cactus Plant Flea Market Box, aka the adult Happy Meal. “Earlier this month, through a collaboration with Cactus Plant Flea Market in the US, we tapped in one of the most nostalgic McDonald’s\n \n (MCD) experiences, enjoying a happy meal as a kid, and repackaged it to make it relevant for adult fans,” McDonald’s\n \n (MCD) CEO Chris Kempczinski said during an October analyst call about the chain’s third-quarter results. “It’s fair to say that this sentimental experience was a success, as 50% of our supply of collectibles was sold in the first four days of the promotion,” he said. “These increased visits also drove the highest weekly digital transactions ever in the US business.” If other companies follow McDonald’s playbook, expect more nostalgic offers.