It was the kind of media attention that is our industry’s worst nightmare. Actually, it could have been worse, but it was definitely on the high end of the Richter scale.
According to Today, it started with a post on X, an image of a receipt headlined by 11 words: “Five Guys prices are out of control. $24 for one person.” I hate to be part of the spiral, but it’s important to note what those few words and a receipt can do.
As you can guess, the social media post went viral, quickly getting 25 million views and prompting talk about restaurants’ rising prices, particularly the cost of fast food. The bill came to about $22 and consisted of a bacon cheeseburger, soda, and fries. And over 12,000 people had something to say about it.
From there, the talk went to Reddit, the social network with 850 million active users. One customer commented on the price of a cheeseburger at one of their local Five Guys in Ann Arbor, rising $3 over the course of a year, from 2021 to 2022.
Rising Prices
Of course, we all know what was happening at that time in the restaurant industry and what continues today—rising prices. Experts suggest we could see record-high beef prices this year, which is no surprise in light of the rising feed costs and drought. Today, the number of beef cattle is at its lowest in decades, a number not seen since 1962.
So, what would you do if you were in Five Guys’ shoes? Their choice was not to respond. They may not have heard that you should always respond to bad reviews, and this was a whopper. Then again, when you have a franchise with over 1,470 locations in 50 states, this little foray into the power of social media may be like an unwanted buzzing mosquito that soon goes off to torment someone else.
And doesn’t quality count? Or is every cheeseburger a cheeseburger? Five Guys is known for their hand-formed, fresh ground beef grilled burgers, baked buns, and fresh-cut fries cooked in peanut oil, a more costly oil when compared to the oil used by other chains. There are no freezers in Five Guys locations—that’s how fresh it is.
While I may sound like a marketing solicitor for Five Guys, it’s the principle and slight loathing for the adverse effects of social media. Did you know, according to Restaurant Business, the average price of a burger reached almost $16 due to beef inflation in 2023? The price of the bacon cheeseburger on the infamous post? $12.49.
The Fine Line Between Raising Prices and Affecting Demand
In the restaurant industry, we’re always faced with that fine line between raising prices to keep up with inflation and affecting demand. According to the February Consumer Food Insights Report, a survey revealed that 64% of respondents felt food prices would continue to rise. In February, consumer food spending reached a weekly average of $195, up 7% year-over-year.
Research analysts have tracked how frequently consumers eat meals at restaurants, fast food establishments, and carryout since March 2022. They noted a slight downward trend since May and June 2023, when inflation really hit home. Elijah Bryand, an analyst and co-author of the report, said, “As the cost of eating out continues to grow at a faster rate than groceries, we are seeing consumers eating out less and cooking at home more.”
The Cost of Doing Business
The USDA suggested food away-from-home prices would continue to rise, increasing 5% in 2024, compared to food-at-home prices increasing by 1.6%. In January, those figures dropped, with the U.N. Food and Agriculture Organization announcing the food price index at the lowest level in three years.
Restaurants aren’t just looking at food prices; labor costs, which account for about 30% of a restaurant’s revenue, are also on the rise. So, as consumers wait in the wings for prices to return to what was once normal, the truth is that, like the many after-effects of the pandemic, this is most likely the new normal.
The question restaurant operators face is where do they draw that fine line?
Comparison Pricing
One helpful strategy is comparison pricing. In our current environment, your customers are shopping around and looking at ways to enjoy going out while eating more cost-effectively. Have you kept tabs on the establishments in your area? Do you know how your prices compare to theirs? Have they shuffled the menu items and recipes to lower costs in order to maintain menu prices?
F&B Insights offers a quick and painless approach to staying ahead of the curve, offering an insight into where that fine line between rising costs and affecting demand falls. Their Menu Pricing division provides the world’s largest menu database, letting you view thousands of menus across the nation and close to home, enabling you to maintain a birds-eye-view of price and menu adjustments. You’ll also receive notifications when a restaurant in your area makes a change to their menu, ensuring you’re always in the know.
To learn more about strategic menu pricing, contact F&B Insights today.
