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Costs for Food, Labor Drive Up Menu Prices

3 min read

Average restaurant menu prices in the United States rose 7.7% between June 2021 and June 2022, the strongest 12-month increase since 1981, according to the National Restaurant Association.

This should come as no surprise in light of surging inflation across the board, with overall consumer prices rising 9.1% between June 2021 and June 2022, also the largest 12-month gain since 1981.

Higher input costs — particularly food and labor — drove the increase in menu prices. “The Producer Price Index for All Food jumped 15.6% between May 2021 and May 2022, while the average hourly earnings of eating and drinking place employees were up 10.1% from year-ago levels,” the association reported.

U.S. Pizza, the locally owned restaurant chain based in Little Rock that is now in its 50th year, raised its menu prices 5% on Jan. 1, Drew Weber, chief operating officer, said last week. “And may have to look at doing it again,” he said. “We’re trying to hold off as long as we can,” but food price increases may force the issue.

For example, this year the price of a 30-gallon tub of mayonnaise, used to make the chain’s house dressing, has risen from $37.54 to $50.32, a 34% leap. A 10-pound package of chicken increased from $39.05 Jan. 1 to $57.01 now, Weber said, a 46% surge.

“I looked at my food costs from last month to this month — this morning, as a matter of fact — and it’s going to go up another 0.3% higher,” he said. “We’re supposedly going to start seeing some of these prices start to fall, as far as chicken and turkey, in August.”

And then there are labor costs. The state minimum wage is now $11 an hour, but “I can’t hire anybody at $11 an hour,” Weber said. U.S. Pizza pays workers $12 to $13 an hour to start. 

Although a number of local restauranteurs have told me labor shortages have started to abate, at least for frontline workers, that’s not necessarily true for management staff. U.S. Pizza has had to reduce the hours it’s open at some locations both because of a resurgence of COVID but also because of a shortage of managers. “We are short managers in every location basically right now,” Weber said. “We try to hire as quickly as we can. We’re just finally starting to see hourly employees come back to the workforce.”

“We’ve always been a company that has promoted from within,” he said. “And right now, nobody wants to take on that responsibility, it seems. It’s just a different workforce than what we’ve ever seen before. So we’re hiring from without, and that will take us about eight weeks to go ahead and get everybody trained to where we need them to be.

“But it’s vicious out there, because we get somebody hired and then somebody comes and offers somebody else more money,” Weber said. “It’s a never-ending cycle right now.”

June sales at eating and drinking places nationwide, meanwhile, posted their fifth straight strong increase, according to the National Restaurant Association, hitting $86.1 billion, a 1% increase over May’s level.

At U.S. Pizza, Weber said, business in the first quarter of this year had returned to pre-pandemic levels, but rising gasoline prices have appeared to cut into sales. “Typically, we’re down about 1% right now on the year over last year,” he said.

But delivery, which previously hadn’t been part of the chain’s business model, has proved helpful, Weber said. Delivery now, among the 10 stores, accounts for almost $100,000 a month in sales, he said. And “I do not see it going away ever.”

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