Restaurants Have Little Appetite for Raising Prices
CREDIT: Restaurant menu image via Shutterstock
When you ask for the check in a chain restaurant this year, you may be in for a pleasant surprise. Battered by value-hungry customers and rising commodity prices, these restaurateurs are showing little appetite for significant menu price increases, according to a new survey.
In fact, menu prices have remained stable for the last two years, and last year, on average, were slightly lower than 2011, according to a survey of mid-size restaurants conducted by SpenDifference, a company that provides restaurant supply chain support.
In 2011, the majority of chain restaurants reported raising prices about 1.5 percent, with 14 percent taking little or no price increase. Last year, 26 percent held the line on pricing, and for those who did raise prices, annualized price increases were essentially stagnant, averaging between 1 and 1.5 percent.
Most price increases to date (63 percent) were taken across-the-board, but nearly a quarter of chains (23 percent) reported raising only entrée, soup and salad prices.
Chain restaurant owners projected menu inflation for 2012 to run 1.7 percent, but that may be overly optimistic. According to SpenDifference, commodity prices in 2012 topped 2 percent on average. Last year was already at a high level for many items, and concepts that purchase a lot of beef and dairy saw increases of more than 5 percent.
While chains continue to be leery of big increases, nearly three-quarters — 72 percent — are countering rising commodity prices by making selective pricing increases. Other strategies include promoting items with lower food costs, renegotiating contracts, changing suppliers, increasing use of third-party purchasing groups, and reducing portion sizes. Some are eliminating high-cost items all together. This year, commodity prices are expected to rise 3 percent, with some proteins going up more than 15 percent.
"Operators are realizing that they need to be much more proactive and aggressive in their purchasing and supply chain management,” said SpenDifference CEO Maryanne Rose. "Other industries embraced group purchasing years ago. The increased use of third-party purchasing organizations shows that the restaurant industry is beginning to recognize the benefits of the group-purchasing model, including co-ops."