Restaurant Menu Prices Surpass Grocery Inflation
Among many other recent post-pandemic economic effects relating to inflation restaurants have been trailing behind inflation increases It on menu prices as compared to the cost of food at home. But according to a Nation’s Restaurant News (NRN) article, reports are showing that, for the first time since 2021, grocery-related inflation is moving a slower rate-of-increase than the inflation costs associated with dining out.
NRN spoke with Mark Kalinowski of Kalinowski Equity Research. “The pricing advantage that restaurants enjoyed, in which grocery prices were going up at a noticeably higher rate, appears to be fully over.” March 2023 data shows “Food-away-from-home prices were the third biggest contributor to monthly inflation, behind transportation services (up 13.9%) and electricity (up 10.2%). Broken down by segment, limited-service menu prices are 7.9% year-over-year (0.5% month-over-month), while full-service prices are 8% higher versus March 2022 (0.7% month-over-month),” states the NRN article. “Conversely, food-at-home prices – mostly grocery – declined by 0.2% and are 8.4% higher versus last year. The food-at-home index fell for the first time since September 2020. This marks the first month in which restaurant pricing is outpacing grocery pricing since late 2021.”
It is important to note that these numbers do not reflect other food-related economic shifts, including the pandemic-era free lunch programs. “According to the National Restaurant Association, the price index for food at employee sites and schools increased by 131%.” The rise of menu costs does correlate with some downturns in restaurant traffic, however these marginal numbers can also be tied to seasonal shifts and other budgeting concerns for diners.
“It is very important that restaurant owners and managers fully understand the balance between raising menu prices to diminish returns and how that can affect customer traffic,” explains Richard Weil, principal and owner of National Restaurant Consultants.
Inflation dictates menu price increases, but these changes do not have to be detrimental to business. The best way to combat inflation-related downturns is to enact menu engineering, and at National Restaurant Consultants (NRC), we are experts in these layout and slight pricing changes that yield a great impact. By regularly analyzing and organizing your menu and its offerings, you can save your restaurant business money while still remaining accessible to your restaurant guests.
To learn more about how menu engineering can make your restaurant more money, revisit this NRC Helpful Moment with Richard Weil and Jared Flowers or reach out to a restaurant consultant today.