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Inflation Leads to Increasing Menu Prices

4 min read

Arkansas restaurateurs, already contending with a resurgent pandemic, are also wrestling with the challenge of inflation, which is putting pressure on thin profit margins and has caused some to raise menu prices.

Ken Vaughan, the vice president of the Arkansas Restaurant Association and president of the Purple Cow chain, said the cost of beef for his restaurants is up 40% to 60%. David Alan Bubbus, founder of David’s Burgers, echoed Vaughan, putting the beef price increase at 50%.

Vaughan said the price of pork has risen about 20%; cheese about 30%; eggs, 40%; poultry, 20%; and produce, 10%-25%. “It’s been very challenging,” he said.

Casey Copeland is room chef of the Quapaw Kitchens at Saracen Casino Resort in Pine Bluff, formerly chef de cuisine at the Oaklawn Jockey Club in Hot Springs and president of the Arkansas Restaurant Association. He said crab legs that used to cost $8 to $10 a pound now are priced at $15 to $18 a pound.

“Big corporations like Walmart have all the buying power and bought up stocks when everybody was stuck at home so they could have crab legs at home, so we’re seeing a direct reflection of things like that in the market,” he said. He added that he expected those prices to come down eventually.

Commodity inflation is, of course, a nationwide phenomenon. Wholesale food prices in June were up 9.6% compared with the previous year, according to a National Restaurant Association analysis of Bureau of Labor Statistics data.

Last month, the BLS reported that the cost to the consumer for food away from home rose 4.2% during the last year, the largest 12-month increase in that index since the period ending in May 2009.

What’s behind the higher costs? A number of interlocking factors tied to the COVID-19 pandemic, which wreaked havoc on supply chains and worker availability.

In addition to driving up food costs, the worker shortage has been felt by restaurants directly, leading to wage increases and putting further pressure on the bottom line. Purple Cow, for example, increased worker pay about 30%. David’s Burgers raised pay by about 25%, Bubbus said.

Restaurants around the country have employed a number of strategies to address the issue, including raising menu prices, cutting portion sizes and simplifying menu offerings.

The Chipotle chain, for example, increased menu prices in June by about 4%. Purple Cow has raised menu prices about 3.5%, Vaughan said.

And Bubbus said Tuesday that David’s Burgers had just approved a 50-cent increase in its best-selling menu item, the No. 1 combo, which he expected to go into effect last week. The price of the No. 1 combo — a burger, fries and a drink — had stood at $7.99 since the founding of David’s Burgers 11 years ago, Bubbus said. The nine-restaurant central Arkansas chain plans to increase the price of each third-pound burger by 50 cents.

“We really value the business of families, and so we work really hard to keep our prices low,” he said. As the company has grown, it’s acquired more buying power, Bubbus said, and that has been partially responsible for its ability to keep prices low. “We’ve been able to decrease our cost of goods sold through our buying power, so it’s kind of offset inflation, if you will, but … it’s out of control now, both in labor and in food costs.”

Copeland said Quapaw Kitchens had avoided raising menu prices, but it has simplified the menu. Vaughan said Purple Cow, which has five locations, had also simplified its menu, removing higher cost items that weren’t selling particularly well.

Another potential strategy to cut costs, reducing portion size, hadn’t been deployed by the restaurateurs I talked with, and in fact, Purple Cow, whose onion rings were voted the best by Arkansas Times readers, increased the portion size of that item when the chain raised prices, Vaughan said.

The company also has focused on wasting less food. For example, instead of automatically placing hamburger setups — tomato, lettuce, onion, etc. — on the plate, servers now ask customers what additions they’d like to their burgers and provide just those — “anywhere we can find cents in terms of the dollars,” Vaughan said.

Bubbus thinks the high cost of food may be a short-term problem, but higher labor costs will be a long-term issue.

Vaughan told me that the vast majority of Purple Cow’s customers had been understanding about the challenges facing restaurants. “I think the consumer has really been loyal to the local businesses, and we’ve been very grateful for that.”

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