By Chris Elliott, Senior Economist (Aug. 10/15) Menu inflation in Canada trended higher in the first six months of 2015, primarily due to higher food costs. Menu prices at restaurants rose 2.7% between June 2014 and June 2015. During that time, prices jumped for beef (+18.4%), pasta products (+10.6%) and tomatoes (+6.4%).

Chart_Menu Inflation in Canada_Apr2014 to Jun2015According to Restaurants Canada’s latest Restaurant Outlook Survey, 66% of respondents reported higher food costs in Q2 2015 compared to a year ago.   Another 28% said their food costs were about the same.  The average table-service restaurant operator reported a 4.2% year-over-year increase in food costs in Q2 while quick-service restaurants saw food costs climb 3.8%.

In addition to higher food costs, operators are paying more for labour, utilities and rent.  Increasing costs and razor thin profit margins are forcing some operators to raise their menu prices.   More than half (56%) of restaurant operators plan to raise their menu prices over the next six months.  This is up from 50% in the previous quarter.    Nevertheless, 44% of respondents plan to keep menu prices at the same level.

Overall, annual menu prices at restaurants are projected to rise by 2.8% in 2015 compared to a 2.1% increase in 2014.  Looking ahead, Restaurants Canada is forecasting a 2.4% increase in menu prices in 2016 due to a moderation in food costs next year.

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