The Consumer Price Index data released Tuesday showed that menu prices continued to cool, albeit slightly, in June — no doubt welcomed news for inflation-fatigued consumers, but hardly a silver bullet to turn around stubbornly negative traffic.
Such a solution will likely take much more deceleration and some time as the industry has a major reputation barrier to overcome as it applies to pricing. Average menu prices have increased by 36% from pre-pandemic February 2020 readings to May 2026, according to data from the Bureau of Labor Statistics.
That is certainly enough to create sticker shock and ignite the ire of consumers, who haven’t been shy about sharing their discontent on social media and elsewhere. It’s also why traffic gains have been hard to come by for the past several quarters.
Perhaps, however, if consumers knew those menu pricing hikes matched restaurant operator expense increases in the same time frame, they’d be a bit more forgiving from behind their keyboards.
According to new data from the National Restaurant Association, total restaurant expenses have jumped 36% since before the pandemic.
Those increases have come from every line on the P&L, from food and labor to utilities and swipe fees. There is a confluence of factors influencing this inflationary environment, including lingering pandemic-era supply chain disruptions, labor shortages, trade policy fluctuations, and a dizzying food commodities market.
Consider the current labor market as an example. The industry shed 33,00 jobs in June, while the U.S. Bureau of Labor Statistics cut the previous month's estimate by 10,000 positions — all ahead of peak summer season. The industry is also contending with a shallower pool of teenage workers, which is a critical employee cohort. Against this backdrop, it is going to cost more to keep good workers.
Then there are the food costs. Tariff policies have impacted everything from seafood to avocados in the past year and a half. Last year, the industry wrestled with record-high egg prices. This year, it’s record-high beef costs squeezing margins.
The association has outlined the extent to which sales have to rise for restaurants to be able to exceed higher input costs, noting that prior to the pandemic, the cost breakdown for an average independent restaurant was:
- 33 cents of every dollar in sales for food.
- 33 cents of every dollar in sales for labor costs.
- 29% of sales coming from other expenses such as utilities, occupancy, supplies, general/administrative, repairs/maintenance, and credit card processing fees.
This equation left a pre-tax profit margin of approximately 5% for a typical restaurant, meaning “significant cost increases were not sustainable,” the association stated.
However, with sharp cost increases across each category since 2019, that equation becomes harder to solve. Average hourly earnings of restaurant employees have jumped 41% from pre-pandemic levels, for example, while average wholesale food prices are up 35%. Meanwhile, utilities, occupancy, supplies, and credit card swipe fees have all registered double-digit percent increases since 2019, which is how the association derived the 36% increase in total expenses.
Consequently, 42% of restaurant operators reported that their restaurant was not profitable in 2025. Indeed, if the pre-pandemic equation for an average independent yielded a pre-tax profit margin of approximately 5%, the current environment would register a pre-tax loss of nearly 29% of sales and that restaurant’s sales would have to increase by 29% above its 2019 sales volume just to break even.
As the association pointed out, however, breaking even isn’t an option for many restaurants still paying down debt loads accumulated during the pandemic. To achieve that same 5% pre-pandemic profit margin, the restaurant’s total sales would need to be 36% above its 2019 sales volume.
In other words, though average menu prices have increased 36% to offset the 36% increase in operating costs, it’s not enough to generate even a slim profit margin. If restaurant operators are out of pricing elasticity, as many consumers believe, they’re going to have to find other solutions to survive, let alone thrive in this relentless environment.
Contact Alicia Kelso at Alicia.Kelso@informa.com
Follow her on TikTok: @aliciakelso