Menu Prices Were 8% Higher In 2022. Here's What That Means For Restaurants
When the refrigerator looks empty, or the kitchen stove doesn't feel inviting, going out to eat can be a simple solution. With continued concern over food costs, inflation, and fewer funds in the discretionary family budget, the splurge on a dinner out might not be a priority. Restaurants are starting to feel the same pinch as the consumer. After battling pandemic restraints, another obstacle, higher menu prices, could become an even more significant hurdle to overcome.
According to Economic Research Service of the USDA, menu prices are 8.2% higher than a year ago. Given that dining out is a choice, some people might skip the reservation or choose a less expensive restaurant alternative. The increased cost is due to individual foods, like eggs and oil, becoming more expensive.
In a recent Wisconsin Public Radio discussion, Kristine Hillmer, president and CEO of the Wisconsin Restaurant Association, raised the concern that some restaurants could be on the brink of shutting their doors. Like consumers, restaurants feel the effect of rising food costs, impacting menu prices. While some items might be removed from menus, other staples do not have a workaround. Given that some restaurateurs are reaching their financial and emotional breaking points, Hillmer is concerned that more restaurant closures could be on the horizon. Operating on a tighter budget without financial options offers no path to success. Higher menu prices are another layer for the restaurant industry to handle.
Is the restaurant industry heading in a course correction?
For some people, walking down a bustling street and having their pick of all types of restaurants is their ideal night out. A recent FSR article proposed a course correction for the restaurant industry. While various factors could contribute to the suggested 15% reduction in number of restaurants, market oversaturation coupled with unclear vision could see mediocre restaurants close their doors. Although less competition might not be great for a consumer's wallet, allowing stronger operations to thrive and less successful ones to close is not necessarily bad.
Before the pandemic, the restaurant industry saw tremendous gains and profitability. While that scenario is optimistic, some businesses might not be well-suited for the industry. Anyone who has watched shows like Restaurant Impossible or Bar Rescue can appreciate that a dream of working in hospitality does not guarantee a money-making endeavor. Given that consumers have a choice of how and where to spend their dollars, the businesses that offer the best value for the product and service provided will find their audience. A course correction might reduce the number of restaurants, but it can also strengthen successful businesses. Consumers value convenience and experience, so restaurants prioritizing those concepts will find an audience. For the restaurant industry, taking a step backward might be a step toward success.
How restaurants are adapting to rising food costs
After seeing a flurry of diners post-pandemic, some restaurants are experiencing a downturn in business. As family budgets feel the impact of rising food costs, inflation, and other economic concerns, restaurants experience the pinch, too. Unlike the consumer, it is more difficult for restaurants to shop around for the best deal. Beyond removing menu selections, some businesses pass on the extra expense to the consumer.
In a 2023 restaurant prediction article, Restaurant Business suggests that guest-check surcharges are here to stay. The additional fee placed on a bill allows the business to offset its increased expenses. Fast casual restaurants, local eateries, and other establishments have started adding a flat or percentage fee to the check. The publication found that these additional fees might be here for a while. For the informed consumer, it might be best to inquire about guest-check surcharges before ordering, which could turn a good deal into a less appetizing one.