Restaurants Shy Away from Price Hikes

To counter rising food costs, a new survey suggests that chains are promoting items with lower food costs, renegotiating contracts, changing suppliers and reducing portion sizes.

January 11, 2013

DENVER - Loathe to distress price-sensitive consumers, chain restaurants are shying away from menu price increases, a new survey of industry executives reveals.

According to SpenDifference, a supply chain co-op, menu price increases last year were slightly lower than in 2011.

Through the fourth quarter of 2012, annualized price increases averaged between 1% and 1.5%, compared to a 1.5% increase in 2011. Additionally, in 2011, 14% of respondents took little or no price increases, while last year, 26% held the line on pricing.

"Nearly a third of the chains reported comp store sales increases of four percent or more," said Brad Moore, SpenDifference senior vice president. "But they also told us that traffic lagged over the past quarter, which speaks to the state of the economy and the potential impact of pricing taken in 2012."

To counter rising commodity prices, chains are promoting items with lower food costs, renegotiating contracts, changing suppliers, and reducing portion sizes, among other strategies. And some are eliminating high-cost items altogether.

"Operators are realizing that they need to be much more proactive and aggressive in their purchasing and supply chain management," said SpenDifference CEO Maryanne Rose. "Other industries embraced group purchasing years ago. The increased use of third-party purchasing organizations shows that the restaurant industry is beginning to recognize the benefits of the group purchasing model, including co-ops."

Advertisement
Advertisement
Advertisement