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A look at rising menu prices

NRN compiles latest restaurant chain expectations on price increases

The challenges of rising commodity costs, paired with an improving consumer environment, are together giving restaurant operators some needed justification to raise menu prices.

In the recent round of fourth-quarter earnings reports, many companies indicated their plans for price increases in 2011, from a small 0.5-percent uptick to a 6-percent hike. It would be some of the first significant moves to take price after many operations have held prices steady through the recession, fearing cash-strapped consumers would be unwilling to pay more.

Nation’s Restaurant News took a look at a select group of companies that recently detailed their plans for menu pricing at the restaurants they own and operate. Not accounting for industry segment or average check, the average menu price increase for 2011 is 1.55 percent, according to the 12 companies NRN highlighted.

Even as the economy improves, and as rising costs pressures businesses, some companies, like Starbucks and Wendy’s, for example, are continuing their more focused “price architecture” approach, raising prices on some items in certain markets.

Others, like Chipotle Mexican Grill, say they are holding off on price increases until later this year, watching to see how price increases are received by their competitor’s guests.

Some brands, such as McCormick & Schmick’s Seafood Restaurants said they are not planning to raise prices in 2011. Others, like Jack in the Box, said any menu prices increases to come would be cautious and modest.

McDonald’s officials in January said they will likely raises menu prices this year in the U.S. to keep up with expected domestic commodity inflation of between 2 percent and 2.5 percent. But officials did not specify the planned price increase.

Domino’s also hinted that prices increases may be coming. Though an amount wasn’t specified, company officials indicated they are open to an increase of about 1 percent.

Texas Roadhouse tested a 2 percent menu price increase last year but decided to implement only a 1 percent increase in 2011 — an amount that company officials said would offset rising commodity costs, while still allowing the brand to steal traffic from competitors.

“While we anticipate losing some margin, we’re going after market share and positioning ourselves to win longer term,” said G.J. Hart, Texas Roadhouse’s chief executive. “By taking less pricing now, we’ll be in a much better position should we face higher inflationary pressures in 2012 and beyond.”

Morton’s stands out as being the most aggressive about menu price increases. Last year the chain raised prices twice for a cumulative increase of 5 percent, adding another 0.9 percent increase in January.

Market research firm Technomic Inc. projected in January that industry-wide restaurant menu price inflation would average 2.5 percent in 2011.

CORRECTION: An earlier version of the story said that company officials at Mortons are talking about price increases for 2011. Morton's said it is not raising prices again this year beyond the 0.9 percent increase in January.

Contact Lisa Jennings at [email protected].

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