Menu Prices Reach a 39-Year High Due to Inflation

The food-away-from-home index rose 0.6% in November and 5.8% over the same period a year ago, marking the highest annual rate of increase since 1982, according to the U.S. Bureau of Labor Statistics.

This restaurant inflation is in large part due to the two main issues hitting the industry particularly hard right now: labor shortages and supply chain disruptions.

For one, a historic labor shortage has led to a major spike in wages. According to Technomic, wages are up 14% this year, which comes in at nearly three times the overall rate of inflation. McDonald’s franchisees, for example, are facing a 10% wage inflation, according to QSR Magazine, forcing the legacy brand to increase menu prices by 6% compared to 2020.

In addition, these labor issues are disrupting the global supply chain, creating challenges for meat processors and distributors who can’t find enough staff to keep operations running smoothly. Wholesale costs for meat and poultry have gone up more than 20% since the start of the year, government data shows.

Although menu price inflation could deter consumers, some operators and companies have reported steady and even high sales in 2021, perhaps due to pent-up demand. This has given restaurants the opportunity to successfully pass rising costs from labor and inflation on to consumers, according to research from Fitch Ratings.

“The six percent [increase] has been pretty well-received by customers,” McDonald’s CEO Chris Kempczinski told QSR. “We do certainly have a very big focus to make sure that we are balancing cost pressures and being able to cover those with making sure that our value perception by customers continues to be favorable, and we are continuing to see those surveys and scores from a value favorability perspective still positive from customers.”