Why Cheaper Restaurant Food May Stay Off The Menu This Year

Dining out is likely to remain expensive as uneven relief in ingredient costs keeps restaurant margins under pressure.

Lower cattle prices have provided some relief this past summer, but soaring cooking-oil and grain costs, along with a rebound in chicken prices, leave little room for broad menu price cuts, according to a note from BofA restaurant analyst Sara Senatore on Friday.

Cattle prices fell 9% from a year earlier in the third quarter, reversing a 9.8% increase in the second quarter, Senatore wrote. But the futures market points to a 1.4% rise from a year earlier in the fourth quarter and a 3.9% rise from the preceding three months.

The decline in cattle prices comes as major restaurant operators face elevated prices for a wide variety of inputs. Soybean oil prices rose 35.7% in the third quarter, while wheat gained 19.6% and corn increased 10%. 

Chicken prices are also turning higher after a sharp decline over the last year. Breast prices were up 4% from October a year earlier, compared with a 36% decline in July. Wing prices rose 2%, reversing a 28% drop over the same period.

Prices 

Prices 

Impacts vary across restaurant chains. Beef and chicken account for 25% to more than 35% of food input costs at restaurants outside categories such as pizza, coffee, and desserts.

Texas Roadhouse sits at the higher end of protein exposure because its menu is mostly beef-based, while Cava and Sweetgreen sit at the lower end. These are the key restaurants Senatore covers.

Consumers hoping for relief from expensive restaurant bills may have to keep waiting. Senatore’s mixed commodity outlook gives operators little reason to think that cost pressures are over.

Food inflation is pressuring the pocketbooks of working-class consumers and has softened demand for McDonald’s, with its shares on pace for the steepest annual decline since 2002.

UBS equity trader Mark Paski recently warned that Wall Street has turned its back on consumer stocks.

Over the medium term, we see preparing meals at home as one of the best ways for consumers to save their money…

…as restaurant prices remain high, which has been the norm for many folks since the inflationary storm sparked up during the Biden-Harris years.