Inflation may be moderating, but not at the restaurant, both for operators and their customers.
Prices for food away from home increased 5.1% annually in January, once again far exceeding the inflation consumers are seeing at grocers and other food retailers, according to new federal data released on Tuesday. Prices for food at home increased 1.2% last month.
But inflation is higher at fast-food restaurants than it is at full-service concepts. Limited-service restaurant prices are up 5.8%, according to the U.S. Bureau of Labor Statistics. At full-serivce restaurants, prices are up 4.3% over the past year.
Prices at school and workplace cafeterias are up 3.1%.
Restaurant prices have been rising at a much faster rate than overall inflation, which was up 3.1% last month. This has increased consumer concern about prices and could be creating traffic headaches for some fast-food restaurants in particular, though both Burger King and Taco Bell have said they see no such problem.
“We did see positive traffic across all income groups,” Matthew Dunnigan, CFO of Burger King parent Restaurant Brands International (RBI), told analysts on Tuesday.
But restaurants are raising prices in part because consumers are willing to pay them. Sales have remained relatively steady despite the inflationary environment.
And their own costs have been increasing. Though there is evidence that the environment for labor and food costs have improved, many operators say their inflation remains too excessive for them to ease off the pricing gas pedal.
That said, some industry executives believe pricing should ease during the course of the year. “I would expect to see less pricing taken in 2024 versus 2023,” RBI CEO Josh Kobza said. “I think you’ll see a pretty decent step back in level of pricing across the industry, and I expect that will be the case for Burger King in the U.S. and [Tim Hortons] of Canada as well.”
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