Menu Prices Surge In September, On Pace For Largest Annual Gain Since 2009

Restaurant operators are taking advantage of the stronger sales and traffic environment to raise prices in spite of falling wholesale food prices. The index for food-away-from-home prices rose 0.5% month-over-month in September, according to the U.S. Bureau of Labor Statistics, which tracks such prices as part of its Consumer Price Index. Over the past 12 months, menu prices are up 2.9% and are on track for the biggest annual gain since 2009. The increase in menu prices contrasts with a drop in wholesale food prices over the past 12 months of 2.8%, according to BLS data.

In contrast, food-at-home prices, which are a measure of grocery-store prices, are up only 0.8% over the past 12 months. Grocery-store prices rose 0.3% in September, the same gain as in July and August.

Gains in same-store sales, combined with menu-price increases, are helping boost operator margins even as they deal with rising labor costs. For example, Chipotle reported same-store sales rose only 2.6% in the third quarter last week, but noted that a combination of falling food prices, especially for dairy products and avocados, and menu-price increases helped boost net income 10.8%.

A wide gap between menu prices and grocery-store prices sometimes leads consumers to swing toward one food option vs. another. But in the current improved market for foodservice sales, operators appear not to be worried.