Higher Food Costs Trigger Menu Price Hikes

Restaurants are feeling squeezed between skyrocketing food costs and small profit margins.

April 29, 2011

IRVINE, Calif. - From fast-food joints to upscale dining establishments, restaurants are feeling the pinch between climbing food costs and a slowly recovering economy, the Orange County Register reports. The higher food costs have caused many restaurants to raise menu prices in order to boost an already tiny profit margin.

Beef prices especially have hit steak and burger restaurants hard, rising close to 11 percent year over year, according to the U.S. Department of Agriculture (USDA). In-N-Out Burger has raised prices three times since 2008. McDonald??s said recently that it might raise menu prices because of higher dairy, egg and beef costs.

Even vegetable and fruit prices have jumped 4.3 percent year over year, the USDA reports. "It??s literally coming at us from seven to eight areas," said Joe Manzella, who owns two seafood restaurants in Anaheim, California. "We get hit on everything from bell peppers to asparagus. Our beef prices have gone up 8 percent."

Usually, restaurants try to cut other corners before hiking menu prices when food costs go up, but this time around, food prices aren??t dropping back down like usual. "Operators have been passing along menu price increases of about 2 percent since May 2010," said Stephen Anderson, a senior restaurant analyst at Miller Tabak.

Additional bad news is that food commodity prices are predicted to go even higher before 2011 ends. "I've never seen food, across the board, go up like this in 11 years," said Manzella, who jacked up the cost of a few dishes recently.

Advertisement
Advertisement
Advertisement