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Menu prices keep soaring, but grocers are raising prices, too

The industry increased prices at a post-pandemic high in June, but grocery price inflation increased as cost pressures mount.
Menu price inflation
Photograph: Shutterstock

Restaurant menu prices continue to rise amid a host of labor challenges, but there are signs that the inflationary cycle is spreading to the industry’s primary competitor for consumers’ food dollar.

Restaurant menu prices increased 0.7% on a month-to-month basis in June, according to the U.S. Bureau of Labor Statistics. That was the highest rate since well before the pandemic and continued an inflationary run as operators contend with a host of cost increases including labor, food and rent.

On an annual basis, food-away-from-home prices rose 4.2% in June—far above the 0.9% food-at-home inflation.

Fast-food restaurants have been raising their prices especially aggressively. They’re up 6.2% on an annual basis.

Yet there is evidence that inflationary pressures are hitting grocers and other retailers that provide food consumers eat at home. Food-at-home inflation rose 0.8% in June from May. That was the highest rate since May 2020—when heavy demand led to price spikes at retailers across the country while restaurants were closed.

 

Restaurant and grocery price inflation

Monthly inflation numbers for both food-at-home and food-away-from-home show grocery prices creeping up.

 

Source: U.S. Bureau of Labor Statistics

 

Both restaurants and grocers have inflation of their own. Labor costs have soared as competition for workers grows fierce—numerous restaurant chains have upped pay levels, added sign-on and recruitment bonuses and upgraded benefits in a bid to get workers.

Other costs are going up, too. Food costs in particular have become a problem, due in part to demand but also distribution challenges as vendors struggle to find drivers and other workers. Rent and construction costs have also seen cost increases.

For the most part, consumers appear to be willing to accept higher prices. Restaurant sales have largely recovered from the pandemic in the first six months of the year even as many locations remain closed. But that sales recovery has been built largely by higher prices and consumers ordering more premium items rather than from restaurants getting customers in more often.

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