Whether you’re entrenched in the restaurant industry or buying groceries for yourself and your family, it’s obvious that food prices have been particularly volatile. What started in mid-2021, largely due to the effects and side effects of the pandemic, has continued.
Challenges in the supply chain, increasing fertilizer and feed costs, extreme weather, and wars have all had their impact felt. In addition to food and supplies, restaurants are also facing rising labor and construction costs.
In response, and to keep a modicum of profits, restaurants began raising prices. The industry made headlines in April 2023 when, for the first time since inflation began accelerating, increasing restaurant prices outpaced grocery prices. While food-away-from-home prices rose 8.8% year-over-year, food-at-home increased by 8.4%.
And the trend continued. According to the latest Bureau of Labor Statistics report, while food at home rose 2.4% from September 2022 to September 2023, the smallest yearly gain since June 2021, food away from home increased by 6%.
Looking over the broader picture, the National Restaurant Association reported that from February 2020 to September 2023, grocery store prices increased by 25%. During that same time frame, menu prices rose 23%.
Recently, EMERGING’s F&B Insights, a platform possessing the world’s largest menu database, took a deep dive into restaurant prices. Looking at over 120,000 restaurant menus, they came up with the most popular items and the changes in today’s menu pricing compared to March 2021.
Curious? Let’s look at what F&B Insights discovered.
Today’s Menu Prices Vs. March 2021
|MENU ITEM||INCREASES SINCE MARCH 2021|
|Spicy Tuna Roll||11%|
As you can see, there’s quite a diverse range, from cheese pizza showing a mere 3% increase and mozzarella sticks a walloping 34%. For restaurant operators, it will be interesting to compare these averages with your own. Have you priced above your competitors, possibly affecting demand? Or have your prices remained well below the average, leaving money on the table?
What Does the Future Hold?
USDA’s crystal ball, a fairly accurate divination tool, suggests 2024 will see food prices increase by 2.1%, with a prediction interval of -2.1 to 6.7%. Grocery prices are predicted to increase by 1%, while restaurants are expected to increase by 4.4%.
Why the Continued Increase in Restaurant Menu Prices?
The consumer price index rose 3.7% in the 12 months ending September 2023. With restaurant prices increasing faster than overall inflation, one wonders how long consumers can manage the increasing costs.
The BLS report also showed some food costs going down or stabilizing. For instance, in September, chicken and dairy rose 0.1%, potatoes fell 2%, and fish and seafood dropped 1.1%. On the opposite end of the spectrum, bacon rose 4.8%, and hot dogs jumped 6.8%.
While food prices show signs of stabilizing, restaurants have another rising cost to bear. The cost of labor has continued to increase. At one time, the benchmark for labor costs usually ranged between 30% to 35% of a restaurant’s total revenue. Today, that benchmark is shifting to about 40%.
Brands Continuing to Raise Prices
In October, Chipotle announced a modest price increase in response to inflation. This represents the fourth time the chain raised prices in the last two years, as reported by CBS News.
In California, where the new minimum wage for fast-food workers reaches $20 in 2024, Chipotle and McDonald’s have already let consumers in The Golden State know they should expect to pay more when the wage goes into effect.
Saving Profit Margins Without Increasing Prices
In today’s environment, operators are turning to alternative approaches to save their profit margins. They’re exploring how to cut their restaurants’ costs, from switching or negotiating with suppliers to buying locally. Their training servers in the art of upselling and cross-selling, and encouraging third-party customers to engage with their brand directly.
Another opportunity to decrease costs comes in the form of reducing waste. If you notice the same dishes returning to the kitchen with food remaining on the plate, consider reducing portion sizes. Get creative with leftovers, creating specials that align with your regular customers’ tastes.
Restauranteurs are known for their inventive, creative minds and the ability to hit a fastball even when it looks like the world’s throwing a curve. No matter the challenge, their ability to evolve and endure reflects their resilience, a little like a chameleon.
F&B Insights helps bars, restaurants, and hotels streamline partnerships with suppliers, monetize sales data, and identify pricing opportunities to maximize profits. Imagine the benefits of knowing when the restaurants in your area raise prices or change their menu items. Now you can.
Join the many other restaurants that have access to the world’s largest menu database, receive alerts when their competitors change their prices, and keep tabs on changing menu trends locally and across the country. To learn more or schedule a demo, contact F&B Insights today.