Restaurants navigate inflationary pressures for menu pricing

Ongoing inflationary pressures continue to take a toll on the food service industry, impacting the cost of goods, labor and customer dining habits, which in turn cut into already low profit margins, local restaurateurs say.

While growth in menu prices continued a deceleration in February that began 11 months ago, the prices still increased 4.5% when compared with the same month in 2023, according to U.S. Bureau of Labor Statistics data. It’s been a rising trend for the industry since February 2020, the month before the COVID-19 pandemic hit. Over the four-year period since then, the BLS says menu prices are up 25%.

To raise or maintain menu prices is a decision many restaurant executives are debating. Among them are Laine Scholz, owner of Garbo’s Pizzeria LLC, and Bryan Bevel, who launched The Pitch Pizza & Pub in 2017..

Scholz, who is no stranger to working in the 34-year-old pizzeria, is new to becoming a sole owner of the establishment in Chesterfield Village. In December 2023, she purchased the remaining 50% stake in the business she did not own from her mother, founder Pam Babcock.

“We try to raise our prices incrementally every few years,” Scholz said, noting doing so is standard industrywide. “Or you do it if you’re keeping an eye on your profit margins, which I am.”

Scholz said 5%-15% profit margins in a restaurant are a success.

Garbo’s last notable price increase was a couple years ago, about 10%-20%, which mostly was kept to specialty pizzas and salads, Scholz said, adding the latter was due to an increased cost of lettuce. A small house salad is currently $12, a 20% increase from its $10 price in 2020.

“We have been very fortunate,” Scholz said, noting 2023 revenue was up 15% from the prior year. She declined to disclose figures. This year is tracking 20% ahead of the same point in 2023, she added.

A 2023 study from market research firm Circana said higher food prices are continuing to influence consumers’ spending and eating behaviors. In the 12 months ending March 2023, food service costs were 4.3 times more than the cost of at-home eating options. But consumers were still eating out, as visits to restaurants and commercial food service outlets in the first quarter of 2023 grew by 1% compared to a year prior. Still, the use of food service shifted to less expensive options such as quick service restaurants rather than full-service eateries. 

Cost concerns
At The Pitch, Bevel said the eatery has not only had to deal with the pandemic and inflation, but also an extensive renovation of the Southern Hills Shopping Center that started in 2022 and is nearing completion.

“I haven’t raised my prices in 30 months,” he said. “I’ve been trying to lean through this to make sure that I can get to the other side, and that’s what I’m doing.”

While declining to disclose figures, he said revenue was down 25% last year from 2022 and noted food costs and renovations, which impacted access to the restaurant, were prime contributors to the downturn. He said flour is the main ingredient at his eatery and noted that when he opened in 2017, a 55-pound bag cost $29. Today, it’s over $50.

“That’s a huge increase,” he said, adding chicken wings are $119 per case, double what he used to pay.

Like Scholz, Brandon Moore is still relatively new to restaurant ownership. Moore and his wife, Hana, purchased south-side eatery Retro Metro in 2022 from Pat Duran. The Moores helped launch the restaurant in late 2020.

Higher beef costs have resulted in increased prices of some menu items every few months, Moore said, adding Retro Metro changes its menu every quarter. For example, the restaurant’s ribeye was $45 in 2020, and with the new spring menu it will cost $62.

“We’re almost doubling cost as far as the price of the meat, and that has taken a serious hit,” he said. “Tenderloins have come down a little bit, but I mean you’re definitely looking at about a 100% increase for the price of ribeye. It’s been crazy.”

Moore said the higher prices he’s paying for beef have a lot to do with inflation. 

“That’s the majority of it. Ever since we’ve seen the inflation happen, the beef market has just consistently gone up with it, and the cost of goods just increased so much,” he said. “I never thought I’d be charging that much for a ribeye. I used to do a dry-aged ribeye when I was the chef at Fire & Ice 14 years ago, and it was a 16-ounce. It was $34. I thought, ‘Man, that was so expensive.’”

One of Retro Metro’s suppliers is Express Foods LLC, which provides seafood such as fish, shrimp and scallops. Chris Perkins, who owns the 20-year-old Springfield-based company, said he sells product in a roughly 70-mile radius of the Queen City to restaurants, grocery stores, food trucks, caterers and private chefs. He said Retro Metro is among over 20 wholesale accounts it has in the Springfield area.

While prices are more stable now than they have been in a few years, he noted some products, such as wild-caught Gulf shrimp, currently have a supply issue.

“Supply has been so low recently as far as the wholesale price point that a lot of fishermen aren’t even going out to fish because it’s not profitable,” he said.

He doesn’t believe the food costs that rose amid the pandemic are going down anytime soon.

“I see it either leveling out or continuing to slowly climb,” he said.

Moore said the higher beef prices haven’t impacted Retro Metro’s bottom line. Year-over-year revenue was up 40% in 2023, although he credits some of that increase to an undisclosed investment in the restaurant’s marketing budget.

A different slice
To aid in increasing profit margins, restaurateurs may need to add or subtract menu options. For Scholz, that meant baking cakes. The baked goods, which include options such as gooey butter, lemon blueberry and pumpkin spice, are sold whole or by the slice and add a bit of a sales bump.

“We sold seven cakes by the slice last week, and that’s 56 slices of cake. That’s a lot,” she said in late March, adding they sell for $7.50 per slice. “I started making cakes last year, and those have a 75% profit margin.”

She said Garbo’s also has increased its bar program, including mocktails.

“That’s kind of how we help offset some of those menu item prices,” she said. “We’re not constantly raising prices. It would be smarter if we could, but we can’t do it.”

Bevel said he had to do away with happy hour at The Pitch.

“I was doing half-price appetizers, and that was a big draw into our restaurant. But now you can’t afford to do that. You can’t make any money doing that,” he said. “I’ve raised my liquor prices a little here and there where I could.”

Bevel said he’s constantly vigilant about portion control.

“I have to make sure that my people are using four ounces of cheese, not six, or that we are not giving extra. We bag every french fry, we portion all of our appetizers,” he said. “Anything I can do to control that volume going out or waste we have [in order] to stay in business right now.”

Now that shopping center renovations are nearly complete, one addition at his restaurant will be an outdoor front patio that should have 16-24 seats available.

Adjustments ahead
Bevel estimated he’d like to subtly make 10%-15% price increases across the menu at some point this year.

“I’ll have some price increases on some things, such as wings,” he said. “There’s some things that I have to do, and then there’s other things that come back down to the portion control, plating and the menu design. That makes a big difference over time.”

Since taking over as sole owner a few months ago, Scholz said she’s still analyzing the overall menu before making any long-term pricing decisions.

“I am diving into the price of every item on our menu. If I’m smart, I need to get a better handle of all of those items,” she said. “It’s kind of fun for me, but it’s not the first thing I can do every day because as a small-business owner, you wear a lot of hats.”

Moore said inflation is continuing to hit consumers everywhere they buy food.

“Everybody sees it, whether it’s at the grocery store or whether you’re eating out – even fast food has increased in price. The price of doing business has always been expensive, and it’s something that we’ve had to adjust for sure,” he said. “There’s a difference between raising your prices to do business and gouging people. We’re definitely not into gouging people, but you have to adjust accordingly, and it’s just something you have to do because if you price yourself too low, then you’re going to run yourself out of business as well.”