SmartPulse — our weekly reader poll in Restaurant SmartBrief — tracks feedback from restaurant owners and managers about current trends and issues.
Last week’s poll question: Is your restaurant raising prices because of higher food costs?
70.99% — Yes.
21.6% — No.
7.41% — I don’t know.
Restaurant-industry consulting firm Technomic predicts that prices at restaurants will increase this year by 2.5% to 3% as companies face rising commodity costs.
The rising costs of ingredients, such as beef, bread, coffee, milk and seafood, are hitting restaurants including Darden Restaurants, Starbucks and McDonald’s. Here’s what the companies are doing:
Darden: The parent company of Olive Garden, Red Lobster and LongHorn Steakhouse says that lower prices for chicken and cost-cutting measures will counter some of the rising prices of key ingredients. Darden hopes to boost profits with new and renovated locations. Darden also is expecting diners to make more visits and to spend more per meal.
Starbucks: With 2011 coffee prices forecast to affect profits, Starbucks is holding its pricing. Starbucks already has purchased coffee for “a few months” of next year, according to a spokeswoman. In 2010, Starbucks’ profits were up after a two-year plan to cut costs and close some locations.
McDonald’s: Expanded value menus and store renovations helped to boost McDonald’s market share last quarter. McDonald’s is expected to raise prices but will use its market influence to implement smaller increases than its competition.
How are you handling the rising costs of ingredients? Join the conversation in the comments.
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I think those hit hardest by rising food costs will be small mom-and-pop restaurants and those who spend the majority of their income on food. The affects of higher prices would surely have a large reach over consumers who typically dine at casual dining establishments (they'll have to pay a couple dollars more for their routine entrees) but those who will truly consider restrategizing to maintain any profit margin from the price increases aren't corporations, they are the people who make their living serving honest, well made, uncommercialized meals.
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With rising gas and energy prices, the next few months will be hard for restaurants. Either they'll have to increase prices or reduce the portion size. Some restaurants have made subtle changes to their ingredients (e.g.: lowering beef grade, adding more filler, changing plate sizes) but we'll see how much they can change without facing a consumer backlash.
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