Financing

Restaurant menu prices keep rising faster than inflation

Limited-service restaurants raised prices 0.4% last month and 6% over the past year, even as grocery inflation continued to ease.
menu prices
Menu price inflation is steady, but rising faster than inflation. | Photo: Shutterstock.

Fast-food restaurants continue to raise prices at rates faster than inflation, according to new federal data, potentially risking customer frustration to maintain margins amid increasing costs.

Limited-service restaurants raised prices 0.4% in November, the same as the previous month and continuing a pattern of consistent monthly price increases for the past half year, according to new federal data released this week. For the past year, the prices are up 6%.

By contrast, overall inflation rose 0.1% in the month and 3.1% over the past year.

Overall restaurant menu prices rose 0.2% in November and are up 5.3% over the past year, showing some overall signs of slowing and driven largely by easing prices at school cafeterias. School lunch prices experienced wild swings during and after the pandemic, driven largely by the institution and then the end of free meal programs.

Full-service restaurants increased prices 0.5% in November and 4.3% over the past year.

By contrast, grocery prices remained largely steady, up 0.1% in November. For the past year, the price for retail groceries is up just 1.7%.

The 3.6 percentage point gap in inflation between the two largest purveyors of food to consumers leaves restaurants at risk of pricing themselves out of certain consumers that question their value.

Industry traffic has been down in recent months as some consumers reduce their visits to account for higher prices. Grocery stores and convenience stores have both benefited from this, as their prepared food offerings attract customers that would have otherwise visited a restaurant for the meal.

The issue may be more acute in the fast-food sector, which is losing lower-income diners to other options and where more than half of consumers say they had “sticker shock” the last time they visited one of the restaurants.

Restaurants, like many industries, raised prices to account for soaring labor costs as well as their charges for food. And outside some concepts still peppering the market with coupons, they seem to have little taste for discounts, though they do put deals on their mobile apps in a bid to get customers to their loyalty programs.

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