Menu price inflation in November rose at a pace not seen in four decades, as restaurants continue to pass along macroeconomic cost pressures to the consumer.
The index for food away from home rose 5.8 percent year-over-year, the biggest change since the period ending January 1982. That included a 7.9 percent increase in limited-service meals year-over-year and a 6 percent rise in full-service meals, according to the Bureau of Labor Statistics.
The index for food away from home rose 0.6 percent in November month-over-month, after a 0.8 percent jump in October. Quick-service meals increased 1 percent month-over-month while full-service meals grew 0.4 percent.
The news comes just a month after the BLS reported quick-service menu prices rose 7.1 percent and full-service meals lifted 5.9 percent year-over-year in October—both the largest 12-month increases in recorded history.
Overall, the U.S.’s consumer price index lifted 6.8 percent in November, which is the largest increase since June 1982.
Despite the trend, major quick-service players like McDonald’s and Chipotle haven’t noticed much pushback from customers, who seem willing to accept the hikes. Several brands suggest their value-based menu allows more room for price increases, such as Jack in the Box. The brand’s 0.1 percent increase in same-store sales in Q4 were “heavily driven” by pricing, and the chain’s data shows there’s opportunity to push costs even more.
In 2021, Jack’s prices rose 3.5 percent. CFO Tim Mullany said there’s usually four opportunities to price annually, but in 2022, the company will look to accelerate that pace while keeping tabs on consumer sensitivity.
“This is something that’s clearly top priority for the company,” Mullany said. “We understand the margin pressures and headwinds we have, and we understand our ability to mitigate those by taking price and, again, that we have dry powder to do that. So, we’re actively evaluating that acceleration.”
But some say it won’t be long until consumers refuse to accept pricing actions. Fazoli’s CEO Carl Howard believes “stealth inflation” (aka the nickel and dime increases of menu items) is “going to smack the consumer right in the face” in the coming months.
“We’re skating on very thin ice with the consumer,” he says. “We don’t have enough help. Supply chain is an issue. … Discretionary income is going to drop. You’re going to see a rapid rise in the value menu.”
Greg McBride, chief financial analyst at Bankrate, said in a note that inflation is outpacing household income, and that reality is significantly impacting consumer confidence, which is at a decade low.
“It is only a matter of time before it impacts consumer spending in a material way,” McBride said.
Restaurants nationwide have frequently turned to menu price increases to counteract the rising costs of labor and commodities, two issues that seem to be here for the long-term. Despite chains raising wages to improve retention and recruitment, accommodation and food services saw job openings increase by 254,000 in October, according to the BLS. Food and drinking places only gained 11,000 jobs in November, and are still 750,000 shy of where they were pre-COVID.
As for the costs of goods sold—a lot of which has been impacted by labor shortages in the supply chain—the price of beef and veal grew 57 percent, grains jumped 55 percent, and shortening and cooking oil rose 41.5 percent in October compared to 2020.