Full-service restaurants, like Olive Garden and LongHorn Steakhouse, had no choice but to raise menu prices in December. Labor and food costs have to be paid somehow.
— Danni Santana
It’s getting more expensive to eat out.
Full-service restaurants, facing higher labor and food costs, raised prices the most in more than seven years in December, a Labor Department report released Friday shows. As grocery costs rise at a slower pace, that could push more U.S. consumers to eat at home, potentially shifting sales away from sit-down chains like Olive Garden and LongHorn Steakhouse, operated by parent company Darden Restaurants Inc.
The gap between how much it costs to eat out instead of grocery shopping “has continued to widen pretty aggressively. It’s a problem,” said Michael Halen, Bloomberg Intelligence analyst.
Rising restaurant costs are another headwind for Americans. Even though low gas prices and high consumer confidence suggest a strong environment, market volatility at the end of the year, disappointing holiday sales, headwinds from trade and the U.S. government’s partial shutdown are starting to put some buyers on alert. If questions about global growth continue to persist, restaurant sales could fall victim to an economic slowdown, with consumers opting to save money by eating at home.
A spokesman for Darden was not immediately available to comment.
Full-service restaurant prices climbed 0.5 percent in December from the prior month, the biggest gain since March 2011, while limited-service restaurants posted a 0.4 percent price increase, the most in almost a year.
That compares with the 0.2 percent rise in the closely watched core consumer price index, which excludes food and energy, and the 0.1 percent drop in the broader CPI, which reflected the biggest drop in energy costs in almost three years.
—With assistance from Craig Giammona.
©2019 Bloomberg L.P.