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Restaurants hike menu prices amid higher food, labor costs

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Yahoo Finance's Brooke DiPalma discusses restaurants raising prices and adding fees as cost inflation eats away at margins.

Video Transcript

DAVE BRIGGS: OK, like the rest of us, restaurants across the country are facing rising inflation and forced to get creative, rather than raise their food prices. Brooke DiPalma is here with that story. And Brooke, we're seeing a staggering increase in hidden fees.

BROOKE DIPALMA: That's right, Dave. Additional fees may include phrases like service charge, non-cash adjustment, kitchen appreciation, fuel surcharge, that is, or wellness. Those are just some of the examples that restaurants are using to get really creative when it comes to combating higher food and labor costs. Now when you take a look at the already implemented menu price hikes that we've seen across the nation year over year, in April 2022's Consumer Price Index, we saw menu price hikes up to 7.2% year over year. Now that's the largest one-year increase since 1981. So, something that we haven't seen in nearly three decades.

Now I did speak to the National Restaurant Association who, of course, is speaking to restaurant owners across the nation quite frequently. And they said in a statement to Yahoo Finance, consumers are sensitive to menu price changes. And while they still view restaurants as essential to their daily lifestyle, the current economic environment will potentially influence their spending patterns in the months ahead.

Now, Hudson, who is a senior vice president of research, went on to say that the typical restaurant business model is not set up to deal with these sustained and accelerated food and labor costs, which is putting extraordinary pressure on operators. And indications are that these will continue. Now I did speak to one restaurant owner who opted to not go this route of additional prices. But when you look at year over year, those food costs just continuing to increase. And so, she told me that we have had to increase our costs more frequently in the last year than ever before.