Restaurants Have No Choice But To Raise Menu Prices Amid Inflationary Pressures 

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by Tyler Durden
Wednesday, Jun 30, 2021 - 08:00 PM

All vaxxed up (or maybe some have the COVID antibodies), many Americans are ditching their on-demand food delivery apps this summer and are supporting local restaurants with an in-dining experience but have been sticker shocked by the rise of menu prices. 

Restaurants, big and small, are passing along the increasing costs of basic commodities and labor. For instance, the cost of vegetable oils, cereals, dairy, meat, and sugar has been erupting since the beginning of the pandemic. Compound this with labor costs, along with the cost of everything soaring, and restaurants already suffering from a lost year in 2020, are raising menu prices at a much faster pace than historical rates, according to Bloomberg

Increasing menu costs are displayed in government data showing inflation rising at its fastest clip since 2009. 

Source: Bloomberg

The Labor Department said this month that consumer prices in May rose .6%, pushing the annual inflation rate to 5% over the last 12 months. Other government data reveals wholesale costs for various meats jumped 20% since the start of the year. Also, producer prices for processed poultry in May soared to a record high. 

According to more government data, restaurant food prices rose 4% in May than a year ago, with limited-service meals up 6.1%. Full-service 4.1% over the last 12 months, the biggest jump since late 2008. 

Bloomberg spoke with Tampa, Florida, restaurateur Andrew Koumi, who increased menu items by 2% to 4%. He operates a six-location chain called Green Market Cafe and attempts to keep food and paper costs below 35% of his menu prices. His computer keeps warning him that certain items, like chicken, have doubled in the last six months. 

Koumi isn't worried about passing along costs to consumers because "everyone" in the industry is "doing it." He said some restaurants are "drastically" raising menu prices."

"Could it go up more? It's scary. I'm hoping that it levels," he added

Restaraunt chain Chipotle raised its menu price by 4% due to increasing labor costs and food prices. Another chain, Cracker Barrel Old Country Store Inc., raised its menu prices by 3% amid persistent increases in wage and commodity expenses. 

So far, consumer confidence remained steady in June amid warnings that inflation could sour their mood.

The great debate today is if inflation is "transitory," and the latest report via BofA's Michael Hartnett concludes US inflation to remain elevated for two to four years. So much for the "transitory" narrative stuffed down our throats by the monetary wonks at the Federal Reserve. 

Get used to paying higher prices... Or just eat at home. 

... or perhaps some restraunts will keep prices steady but decrease the size of the meal, something known as "shrinkflation."