Menu price increases modest despite rising commodities costs

Menu prices at quick-service and full-service restaurants increased moderately during the past year, according to National Restaurant Association analysis of data collected by the Bureau of Labor Statistics.

Menu prices at U.S. restaurants increased 2.8 percent during the past year ended August 2012, the report said. For the quick-service segment, that increase was slightly higher, at 3.3 percent, while full-service restaurants saw a 2.6-percent increase in pricing.

Given the rising price of commodities, year-over-year menu price increases could have been much higher, according to Hudson Riehle, senior vice president of research at the NRA. He noted that the smaller increases are due, in part, to restaurants remaining cautious of still-lagging levels of consumer confidence.

In 2008, Riehle said, restaurants saw menu price increases of about 4.4 percent. “As the economy weakened and consumer demand softened [during the recession], obviously operators became a lot more cautious about raising menu prices,” he said. “What you’ve seen over the past couple of years is that menu prices on an annualized basis have been gradually edging up."

In 2010, menu prices increased by 1.3 percent, and in 2011, menu prices increased 2.3 percent, year over year.

Customers are more conscious of their spending these days, Riehle said, which means that they’re much more thoughtful about their dining-out experiences. Pricing, food quality, and service all play into a customer’s perception of a restaurant and can determine if the customer will make a return visit.

“It means that operators have been increasing menu prices, but in a manner by which the consumer still perceives that there is value in that restaurant experience,” he said.

Last year, wholesale food price inflation — a major input into restaurant operating costs — increased by more than 8 percent, the largest price jump in 30 years, he said. Menu prices will likely continue to increase at a lower rate than commodity costs, he said.

Although Riehle was hesitant to make projections about future price increases, he did say that the pressure of rising wholesale food costs likely wouldn’t be going anywhere during 2013.

“The operator community will obviously be dealing with it,” he said.

Contact Erin Dostal at erin.dostal@penton.com.
Follow her on Twitter: @erindostal