For menu prices, the only place to go seems to be upward.
The food away from home index rose 6.4 percent year-over-year in January, which is the largest 12-month increase since January 1982, according to the Bureau of Labor Statistics. The price of quick-service meals jumped 8 percent, while full-service menu prices increased 7.1 percent.
In terms of month to month, the food away from home index rose 0.7 percent in January compared to December. The cost of full-service and limited-service meals both rose 0.7 percent month-over-month, as well.
America's biggest restaurant chains are feeling the pressure. Because of staffing shortages in the supply chain and labor challenges, Starbucks took pricing action in October and this past January. Additional hikes are expected through the balance of 2022. Additionally, Chipotle offset labor and commodity pressures with a 4 percent mid-December menu price increase, giving the chain about 10 percent of price in January. CEO Brian Niccol said the brand could take additional pricing if costs don’t abate.
Brands often respond to these price jumps by touting their value proposition and room to maneuver.
“It’s really the last thing we want to do,” said Niccol, during Chipotle's Q4 earnings call, “but we’re fortunate that we can pull it. And we see no resistance to date with the levels that we’re currently at. … The chicken burrito for most parts of the country is still less than $8. Chicken bowl is still less than $8. And that’s phenomenal value.”
McDonald's CFO Kevin Ozan said in late January that topline momentum will be "hampered by significant commodity and labor inflation" in 2022. For the fast-food giant, food and paper costs grew 4 percent domestically and 3.5 percent internationally last year, and the company believes inflation will double this year. Most of the pressure will come in the first half of 2022 and ease as the year goes on.
But similar to Chipotle, McDonald's is leveraging its value-based reputation to get through the storm.
“What helps us from a research standpoint is the way consumers view value and the perspective of value,” Ozan said during the company's Q4 earnings call in January. “And I think in 2022, that will continue to be really important as inflation is hitting customers potentially harder than it's hit people in a long time. And so we're very cognizant of making sure that our value proposition continues to be strong. And so we do look at kind of absolute pricing compared to just increases also.”
In the face of inflation, Del Taco leaned heavily into value with the introduction of its “20 under $2” value menu. The brand claims it’s the “largest value menu of any QSR+ brand,” filled with options like tacos, burritos, nachos, snacks, treats, drinks, and shakes.
In the casual-dining segment, 4 Rivers Smokehouse recent launched an "Inflation Menu" featuring value-based barbecue meals.
“We know it’s tough for everyone right now and the Inflation Menu is our way of helping and saying thank you,” said John Rivers, Founder/CEO of 4R Restaurant Group. “We’re excited to debut these creative new items that are offered at a value. Make sure you bring an appetite, because the Barbacoa Bowls and Buffalo Mac Attacks are every bit as big as they are delicious.”