One especially stressful part of the equation is how much of the food price inflation to pass on to customers. “Many operators have been groping in the dark about how much price increase they can and should take,” says vice chairman of investment banking for BofA Securities, Roger Matthews. “The issue is both relative and absolute pricing. Relatively, you care about what your competitors are doing. If you’re taking a 10% menu price increase and they’re taking 5%, you’re out on a limb. Then there’s the issue of absolute pricing. At some point, price increases can become so aggressive that the customer says, ‘I’m not paying that for this anymore. It’s not worth it.’”
Menu prices are up significantly overall. In August, the price of food away from home was up 8% compared to August 2021, according to data from the Bureau of Labor Statistics. This represented the largest 12-month price increase since 1981.1 Concerns are, of course, that after raising prices aggressively this year, the industry is facing another cycle of discounting and promotions, which no one likes.
Labor costs have also risen, and most restaurants remain understaffed, but Short says most operators feel they have figured out how to manage their workforce. Although supply chain issues remain, with some unpredictable item shortages, the industry is not as affected as many businesses.