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Limited-service menu prices soared 8% in December

Full-service prices rose 6.6% as food-away-from-home inflation hit a 40-year high in December.
restaurant menu price inflation
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Fast-food menu price soared 8% in December, according to new federal data released Wednesday, as the industry continues to pass on higher costs for food and labor onto customers.

Prices for full-service menu items were not far behind, according to the U.S. Bureau of Labor Statistics, rising 6.6% annually.

Overall, food-away-from-home inflation rose 0.6% monthly in December and 6% annually, the largest increase for the index since 1982.

That was nevertheless below the 6.5% increase in consumer prices for food-at-home and 6.3% for food overall. But that hides the true impact of menu price inflation, given that free lunch programs have sent those prices down 64%.

The industry is raising prices aggressively because their own costs have taken off. Restaurants are paying considerably more for both food and labor, their two highest cost inputs.

On Tuesday, for instance, the pizza delivery chain Domino’s said that its food costs this year are expected to increase 8% to 10%. That is “three to four times” the normal rate of inflation, CEO Ritch Allison said. As a result of that as well as higher labor costs, the company is planning changes to its permanent value offers.

Labor likewise continues to be a problem. Companies like El Pollo Loco are losing sales because of a lack of workers. And wage rates continue to take off. More operators today believe labor challenges could be a longer-term problem.

“Labor tightness will be here for some time to come,” Frances Allen, CEO of Checkers and Rally’s, said at the ICR Conference earlier this week.

At the same time, consumers themselves appear to be brushing off higher prices. Total restaurant sales have been up more than double digits from where they were before the pandemic in recent months. There’s little disincentive, in other words, to keep raising prices to recover some of the costs.

“We look at what our competitors’ pricing is, and price accordingly,” Dan Accordino, CEO of the big Burger King franchisee Carrols, said at ICR on Monday. The company raised prices 8% in the fourth quarter, on par with overall fast-food inflation. “Over time, we generally have not seen a whole lot of pushback from consumers.”

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