menu prices

US menu prices take their highest leap in 40 years

One rather inevitable effect of the strains on the food industry has been rising costs and higher menu prices, and the consequences have been spectacular.

Amid a landscape of stretched supply chains, climate change, a labour crunch, and other factors, restaurants have been raising their menu prices to offset the resulting unprecedented spike in food costs.

According to the latest US Bureau of Labor Statistics, the food away from home index rose 6.4 per cent year-over-year in January. That is the largest 12-month increase in 40 years since January 1982.

The price of quick-service meals jumped eight per cent year-over-year, while full-service menu prices increased 7.1 per cent. Looking at month-to-month trends, the food away from home index and the average cost of full-service and limited-service meals all rose 0.7 per cent last month.

Restaurant operators have been raising prices largely because their own costs have soared: US federal data suggests food production prices are up 13 per cent and wage rates are 10 per cent over the past year.

A similar story in Canada

North of the border, Restaurants Canada’s latest Restaurant Outlook Survey found that Canadian menu prices are expected to increase by an average of 5.3 per cent in 2022. By segment, menu prices are expected to rise by 4.5 per cent at quick-service restaurants, by 5.6 per cent at table-service restaurants, and by 5.5 per cent for all other foodservice establishments.

Restaurants Canada notes those spikes will be deemed necessary to cover the rising cost of food, higher wages, and other operating expenses, while supply chain disruptions for food and other supplies is another factor, impacting 96 per cent of the restaurants surveyed.

Still, restaurants are doing what they can to minimize the impact on guests. Nearly half of respondents said they are absorbing or partially absorbing the cost increase.   

Inflation, of course, is also playing its part. In December 2021, Canada’s inflation rate soared to a 30-year high of 4.8 per cent, due to ongoing supply-chain disruptions, rising energy prices, and pent-up consumer demand. By comparison, food prices at grocery stores jumped by 5.7 per cent, the largest increase since 2011.

In many provinces, the contributing factors have been exacerbated by minimum wage hikes in recent months. Industry personnel warned late in 2021 that those increases would be reflected in menu prices.

Even the biggest restaurant chains are feeling the pressure, with brands like Starbucks, McDonald’s, and Chipotle all raising menu prices in recent months. Chipotle’s rise was particularly notable, as the company said an order costs about 10 per cent more than it did one year ago.

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