As inflation seems to have finally cooled, restaurants continue to struggle with the increased costs from the last few years. In four years, average restaurant food costs have risen 29 per cent and labour costs have increased by 31 per cent. As a result, many restaurateurs have raised menu prices to try and recoup some of those costs.
As of August of this year, restaurant prices had increased 3.4 per cent across Canada, down from January 2023’s rise of eight per cent. According to Technomic’s recent Industry Insights report, menu inflation varies from province to province. Here is a breakdown of the increases in menu pricing year over year, by province:
- Newfoundland and Labrador + 5.2 per cent
- New Brunswick + 4.9 per cent
- Nova Scotia + 4.5 per cent
- Ontario + 4.2 per cent
- Prince Edward Island + 4.0 per cent
- Manitoba + 3.5 per cent
- Saskatchewan + 3.5 per cent
- Alberta + 2.9 per cent
- British Columbia + 2.8 per cent
- Quebec + 2.4 per cent
To be able to keep customers happy and maintain profit margins, some restaurants are testing out dynamic pricing, which means that menu prices could fluctuate across the board on a schedule several times a year.
Wendy’s previously announced that they would begin testing dynamic pricing, allowing prices to fluctuate to reflect consumer demand. “Beginning as early as 2025, we will begin testing more enhanced features like dynamic pricing and daypart offerings, along with AI-enabled menu changes and suggestive selling,” said CEO Kirk Tanner.
However, as a result of consumer backlash, Wendy’s has changed their position on dynamic pricing, assuring customers that they will not be charging higher prices during peak hours. Studies show that nearly two-thirds of consumers react negatively to dynamic pricing, with 81 per cent of diners prefer changing their meal times or skipping dining out altogether to avoid fluctuating restaurant pricing.
What does the future of menu pricing look like? With consumers so focused on value, LTOs and loyalty have become critical for restaurants to attract and retain clientele. Robert Byrne, director of consumer and industry insights at Technomic, noted that successful LTOs need to include “craveability and uniqueness.” As consumers continue to remain discerning with their discretionary income, it will become increasingly competitive for restaurants as they balance successful pricing strategies with the bottom line.
