Menu Innovations | April 2013 | By Terah Shelton Harris

No Hike Here

Restaurant chains shy away from menu price increases.

Restaurant chains shy away from menu price increases
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Despite drought-driven food-price increases, quick serves are refusing to pass rising costs on to the customer, according to a recent survey by group purchasing firm SpenDifference. The study shows that more than one-quarter (26 percent) of restaurants maintained steady pricing in 2012, compared with 14 percent the year before.

“Operators are looking to reduce costs through renegotiating supplier agreements and distribution contracts, promoting lower-food-cost items both in their main menus and LTOs,” says Brad Moore, senior vice president at SpenDifference.

However, Moore says he doesn’t believe this trend will—or can—continue in the future. He says at some point, given the profit and loss impact, chains will be forced to closely mirror the cost inflation that’s affecting every chain to varying degrees.

Barry Nelson, vice president of operations at Pancheros Mexican Grill, says the chain has no immediate plans to raise prices. This is despite the fact that most of the brand’s core food items will be hit by rising commodity costs that are expected to increase an average of 3 percent, with some proteins going up more than 15 percent, according to SpenDifference.

Nelson adds that Pancheros’ focus on operating simple and efficient restaurants is the first line of defense against a rise in commodity costs. “This strategy has fared well for our brand so far, and as a last resort, we would choose to raise prices. But that is not a decision we take lightly,” he says.