All Articles Food Restaurant and Foodservice Will you charge more for meals this year?

Will you charge more for meals this year?

3 min read

Restaurant and Foodservice

Global food prices are expected to increase this year after falling a bit in the last three months of 2012, and they could rise sharply if there are new weather-related crop failures, according to the United Nations’ Food and Agriculture Organization, Reuters reported Thursday. In the U.S., food prices are expected to rise between 3% and 4% this year overall, according to the American Farm Bureau Federation and the Agriculture Department, the Argus Leader reported.

The news poses yet another challenge for restaurants looking to shore up the bottom line while also boosting sales. To cope, restaurant chains are adding more chicken dishes to the menu and cutting back on pricier beef, which is expected to grow even more expensive this year, as supplies dwindle after the worst droughts in half a century sent cattle herds to an early slaughter. Mintel found that restaurant dishes using chicken breast rose 52% between 2009 and 2012 and vegetarian dishes increased 22% in the same period, Food Business News reported.

Eateries are finding other ways to cope with higher costs, including revamping value menus to reflect reality. At Wendy’s, the new value menu replaces the old 99-cent price point with a “Right Size Right Price” menu with prices ranging up to $2. The chain is also experimenting with new, higher quality breads like a pretzel roll to raise the value of premium sandwiches without spending even more on the meat, according to The Associated Press.

With the possible exception of a few cents added to some value menus, there’s evidence that chains will stop short of raising menu prices, despite their higher costs.  Restaurant chains raised prices at slightly lower rate last year than in 2011, and they’re increasingly reluctant to charge more in 2013, despite rising commodity costs, Nation’s Restaurant News reported this week, citing a survey from Denver-based SpenDifference.

One-fifth of the 35 restaurant executives surveyed said they didn’t raise any prices last year, and 63% of those who did raise prices did so across the entire menu, the survey said. During the same period, commodity costs rose 2% and prices for beef and dairy jumped more than 5%.

Respondents cited a host of alternatives they employed last year to avoid raising prices, including reducing portion sizes, renegotiating vendor contracts, promoting dishes with lower food costs, and nearly 29% said they cut high-cost items from the menu entirely.

The report also pointed out a potential bright spot — provided there’s not another drought, commodity prices are on track to settle down in the second half of the year, giving operators a bit of breathing room.

Will you raise prices this year? Have you come up with new ways to shave costs? Tell us about it in the comments.