The Real Impact of Inflation on Restaurant Prices: What Consumers Can Expect in 2025
As inflation continues to affect the economy, one area where consumers are feeling the pinch is in restaurant pricing. As prices continue to rise, the cost of eating out has become a source of frustration for many consumers. A recent survey revealed that 53.1% of consumers felt the prices at fast food chains were unfair — more than any other type of restaurant.
The reality is, that as inflation continues to shape the restaurant industry, consumers are left wondering what they can expect when they head out for a meal in 2025. Will prices keep climbing? And what can consumers and restaurants do to adapt to the new cost of eating out?
Let’s take a closer look at how inflation is influencing restaurant prices and what it means for diners this year.
How Much Have Restaurant Prices Increased in 2024?
In 2024, while restaurant price hikes have been more moderate than in recent years, they’re still contributing to higher costs for diners. According to the National Restaurant Association, full-service restaurant menu prices, which had surged by as much as 9.0% year-over-year during 2022, have risen by a more modest 3.6% by December 2024. Similarly, limited-service restaurant prices, which peaked at 8.2% in April 2023, have increased by 3.7% in 2024.
Even though these increases aren't as steep as the past few years, they still add up because of compounding. With prices still climbing one year after another, diners are feeling the cumulative impact on the cost of eating out, even if each year’s price hikes are less extreme than before.
Cost of Dining Out vs. Cooking at Home: Has the Gap Widened?
If you’ve noticed your restaurant bills getting steeper, you’re not just imagining it. The cost of dining out has become significantly more expensive compared to cooking at home.
On average, preparing a meal at home costs about $4-6 per person, while eating out at a restaurant can run you $15-20 or more, which is a price difference of at least $10 per meal. And this gap is only getting bigger.
Based on a study conducted by Kalinowski Equity Research, the difference between restaurant and grocery price inflation in August 2024 increased by 310 basis points (3.1%), a massive jump compared to the historical gap of just 60 basis points. This current gap is five times wider than the long-term average, which reflects the much higher cost for those choosing to dine out.
What’s Driving Restaurant Price Inflation in 2025?
When it comes to rising restaurant prices, many people immediately think of food costs, but the reality is that there are several operational expenses contributing to inflation. Over the past few years, restaurants have faced significant price increases in a range of areas, making it harder to maintain profitability without raising menu prices.
From 2019 to 2024, several key costs have surged:
- Swipe Fees: Up 32%
- Labor: Up 31%
- Food: Up 29%
- Supplies: Up 20%
- Utilities: Up 16%
- Occupancy: Up 12%
In order to keep their doors open and remain profitable, restaurants have had to adjust their pricing. On average, prices need to rise by 26.2% to cover these growing expenses. According to the U.S. Bureau of Labor Statistics, menu prices have actually increased by 27.2% during this period, which aligns closely with what restaurants need to charge to offset these rising costs. This mix of factors has made it difficult for many restaurants to stay competitive without passing some of these costs onto consumers.
How Restaurants Are Adapting to Inflation in 2025
As inflation continues to impact the restaurant industry, many businesses are getting creative in how they manage rising costs while still keeping customers satisfied. Here are some of the ways restaurants are adapting to inflation in 2025:
- Shrinkflation 2.0: Are portion sizes getting smaller again? Many restaurants are subtly reducing portion sizes as a way to manage rising food costs without directly raising prices.
- Tech-Driven Pricing: The rise of AI-based dynamic pricing is making waves in the restaurant industry. This technology allows businesses to adjust prices in real-time based on demand, time of day, or even weather conditions.
- Streamlined Menus: Many restaurants have chosen to cut low-margin items from their menus. Instead, they’re focusing on high-demand, high-margin dishes in an effort to reduce waste and improve efficiency.
- More Automation: The shift toward self-service kiosks and AI-powered ordering systems is continuing to rise, which reduces labor costs and improves order accuracy. According to a PYMNTS Intelligence report, 84% of U.S. consumers now prefer self-service kiosks, with 66% opting for them over traditional staffed checkouts.
- Subscription Dining & Loyalty Programs: To promote customer loyalty and ensure steady revenue, many restaurants are exploring subscription dining models or loyalty programs.
These are just a few of the ways restaurants are tackling inflation in 2025, all while keeping customers satisfied and their businesses running smoothly.
How Are Consumers Reacting to Higher Menu Prices?
With restaurant prices still rising, consumer behavior is shifting in noticeable ways. More and more people are cutting back on dining out, with 55% of U.S. adults in Q3 of 2024 reporting they’re spending less on eating out, up from 52% earlier in the year. This trend has led to a significant increase in takeout and delivery orders, but it’s not just about convenience as many consumers are seeking more affordable options. In fact, 38% of people agree that value-focused dining is becoming more important to them, and 26% strongly agree.
Meanwhile, a growing number of people are choosing to eat at home instead. A CivicScience study from June 2024 found that 57% of consumers were dining in more often, up from 51% in 2019, likely as a way to save money. Beyond that, more than one-third of people are reallocating their dining-out budgets to spend more at the grocery store, where they feel their money stretches further. It’s clear that rising restaurant prices are leading many consumers to rethink their dining habits, with many choosing home-cooked meals or takeout deals that offer more bang for their buck.
What’s Next? Predictions for Restaurant Prices in 2025 & Beyond
Looking ahead to 2025, it’s expected that inflation will continue to play a role in pushing restaurant prices higher, though at a more moderate rate than in previous years. Overall food prices are predicted to increase by 2.2%, with food purchased for home consumption rising by 1.3%. However, food-away-from-home, which includes restaurant meals, is expected to see a slightly higher increase of 3.6%.
For restaurant owners, this means focusing on cost-efficiency through tech while also adapting to changing consumer expectations. For diners, prices will likely continue to increase, but possibly with more value-driven offerings, like bundled deals and loyalty programs, to offset the higher costs.
Final Thoughts on the Impact of Inflation on Restaurant Prices
Overall, it’s clear that inflation will continue to impact restaurant prices in 2025, though probably not as drastically as in recent years. While dining out may get a little more expensive, especially at fast food and limited-service establishments, new tech innovations like AI-driven pricing and self-service kiosks could help keep costs in check. For consumers, this might mean more value-focused deals and a shift toward home-cooked meals as a way to balance the budget.
While eating out will still be a part of our lives, both restaurant owners and diners will need to adjust and find ways to make dining out more affordable as inflation continues to rise in the years ahead.
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