7 Action Steps as Inflation and Menu Prices Keep Rising
Hospitality profit margins are becoming increasingly more vulnerable, but raising prices may not be the total fix, requiring closer attention to efficiencies.
An October 13 report by Business Insider looked at a survey Toast conducted of restaurant operators, which found that nearly half of them plan to raise menu prices if inflation, tariffs, and higher labor costs persist. The report noted that the National Restaurant Association estimates that to maintain a modest 5% profit margin compared to 2019, restaurants would have to increase menu prices by roughly 30%. But have they? Will they? Most importantly, CAN they raise them much more?
On October 24, the NRA shared research findings that menu price growth slowed in September, following solid gains this year. Year over year, full-service restaurants saw about a 4.2% increase; limited-service businesses increased prices about 3.2%. As inflation keeps rising, price increases can only go so far.
For operators, something’s got to give.
Customers already face high prices when dining out, from lasting pandemic-driven spikes of 30%+, and may reach the point of going out less frequently and shifting to lower-cost options. Price increases only go so far. Operators must balance between raising prices (carefully), optimizing cost structure, and improving their value proposition so guests keep coming.
Consider these action steps:
1. Audit your cost base:
Which ingredients/labor/supply-chain inputs are under most pressure? Where can you renegotiate, substitute, or optimize?
2. Menu engineering:
Identify high-margin items, items you can upsell, items you may need to remove or adjust portion/price.
3: Value communication:
If you raise prices or adjust portion sizes, you’ll want to clearly communicate to guests why (better ingredients, sustainability, experience) so they feel the value.
4: Traffic and volume monitoring:
Track guest counts and average check. If you raise price but lose guests, your revenue may drop nonetheless.
5. Segment strategy:
If you run multiple channels (full-service, limited-service), recognize that each has different consumer sensitivities as the data show.
6. Regional benchmarking:
In Mississippi, menu price growth is lower than national peaks; ensure your pricing remains aligned with local market expectations.
7. Forward planning:
If ingredient/labor inflation continues, you may need to schedule periodic reviews of your menu and pricing rather than one-time hikes. Also plan promotions or value-add offerings to maintain traffic.
MHRA continues to monitor economic shifts and to advocate for Mississippi operators' profit margins at the state and national level.
An October 13 report by Business Insider looked at a survey Toast conducted of restaurant operators, which found that nearly half of them plan to raise menu prices if inflation, tariffs, and higher labor costs persist. The report noted that the National Restaurant Association estimates that to maintain a modest 5% profit margin compared to 2019, restaurants would have to increase menu prices by roughly 30%. But have they? Will they? Most importantly, CAN they raise them much more?
On October 24, the NRA shared research findings that menu price growth slowed in September, following solid gains this year. Year over year, full-service restaurants saw about a 4.2% increase; limited-service businesses increased prices about 3.2%. As inflation keeps rising, price increases can only go so far.
For operators, something’s got to give.
Customers already face high prices when dining out, from lasting pandemic-driven spikes of 30%+, and may reach the point of going out less frequently and shifting to lower-cost options. Price increases only go so far. Operators must balance between raising prices (carefully), optimizing cost structure, and improving their value proposition so guests keep coming.
Consider these action steps:
1. Audit your cost base:
Which ingredients/labor/supply-chain inputs are under most pressure? Where can you renegotiate, substitute, or optimize?
2. Menu engineering:
Identify high-margin items, items you can upsell, items you may need to remove or adjust portion/price.
3: Value communication:
If you raise prices or adjust portion sizes, you’ll want to clearly communicate to guests why (better ingredients, sustainability, experience) so they feel the value.
4: Traffic and volume monitoring:
Track guest counts and average check. If you raise price but lose guests, your revenue may drop nonetheless.
5. Segment strategy:
If you run multiple channels (full-service, limited-service), recognize that each has different consumer sensitivities as the data show.
6. Regional benchmarking:
In Mississippi, menu price growth is lower than national peaks; ensure your pricing remains aligned with local market expectations.
7. Forward planning:
If ingredient/labor inflation continues, you may need to schedule periodic reviews of your menu and pricing rather than one-time hikes. Also plan promotions or value-add offerings to maintain traffic.
MHRA continues to monitor economic shifts and to advocate for Mississippi operators' profit margins at the state and national level.
Mississippi Hospitality & Restaurant Association
11 Northtown Dr., Suite 125, Jackson, MS 39211
(601) 420-4210
11 Northtown Dr., Suite 125, Jackson, MS 39211
(601) 420-4210
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