So the customers stop eating altogether, go somewhere else ( $$$ more business for them $$$ ) or they shop and make their own meals at home. Which is it?
If what I’m seeing in my region is any indication, the previous customers are most likely to shop and eat more meals at home. Eating out has become a luxury for more and more people. I don’t think there’s a single restaurant within ten miles of my home that is doing more business today than it did ten years ago … and that’s even with a half-dozen places closing permanently in the last two years — AFTER they survived the COVID lockdowns.
All demand does not immediately go to the next cheapest fast food joint. Some consumers will stop going altogether because it’s too expensive no matter where they go. Or consume less at the places still open because they can afford it less often.
The ones that can automate or streamline service to keep prices down will do so. But if consumers are out of work or don’t have the discretionary income any longer, they will see slimmer margins, too.