Restaurants Plan to Raise Prices Amid Cost Increase

Most restaurant chains plan price increases due to economic and supply factors.

July 02, 2014

DENVER – Unexpected food cost increases this year are likely to force chain restaurants to raise menu prices even as they continue to face stiff competition, according to a new purchasing update released by restaurant supply chain co-op SpenDifference.

Prices for beef and cheese are at an all-time high, while a virus that affected pigs in Iowa last year has spread to 23 states, severely impacting pork costs. The sharp increases in commodity prices have also raised concerns that consumer food-inflation could reach 3% by the end of this year.

The higher costs come as restaurant operators nationwide slowly begin raising prices. The company’s latest chain menu price tracking survey found that although more than half of chains held the line on price increases during the first quarter, 93% planned to raise prices during the second half of this year.

“Recent events affecting commodities may provide operators the impetus to follow through on their planned increases,” said SpenDifference CEO Maryanne Rose, in a press release. “Unforeseen factors, whether it's government policy, geopolitical events, disease or natural disaster, often arise and drive prices higher. No matter the cause, volatility is real and managing the risks before the unknown happens is key.”

The purchasing cost update revealed these key findings:

  • Cheese, butter and whey are 15% or higher in cost from the same time last year.
  • Beef prices are 15% higher compared to the same time last year.
  • Pork used for sausage has risen 21% in cost since the same time a year ago. The price of pork bellies used for bacon has risen a modest 2%, but it is coming off a year that saw record high prices.
  • Due to demand, the cost of liquid egg whites has risen 57% over 2013.
  • Corn prices, however, are falling and should help poultry producers increase their supplies.

With commodities expected to remain volatile during the rest of 2014 and in the future, operators can take steps to lessen the impact.

“Consider locking in prices now to benefit from the security of known margins and protect against sudden price swings,” Rose advised. “Other options are making subtle changes in raw materials, such as buying frozen instead of fresh, slight changes in specifications or slightly reducing the portion size of entrees if doing so does not alienate customers and hurt the brand, and offering LTOs on lower-cost products.”

To learn more about successfully managing supply chain issues in our company’s foodservice program, register now for a free NACS CAFÉ Foodservice Supply Chain webinar on August 12.

Advertisement
Advertisement
Advertisement