As you’re planning your restaurant’s budget for the coming year, take one critical factor into account: food inflation. While food prices have dropped somewhat since their peak earlier this year, they’re still considerably higher than in previous seasons.

Curious about what’s causing this prolonged increase? You’ve come to the right place. Plus, we’ll look at a few ways your restaurant can cut food costs until inflation eases.

What’s impacting the price of food?

Have you been seeing higher food invoices than usual? You’re not alone; it’s an issue across the country. According to the U.S. Department of Agriculture, food prices in September 2023 were 3.7% higher than the same month in 2022. The inflation rate appears to be increasing, albeit at a slower rate. The Consumer Price Index (CPI) for food — a measure of food inflation — rose by 0.2% between August and September 2023.

A number of factors are affecting the spike in food inflation:

• Overall inflation. Food prices aren’t the only thing rising; costs are up across the spectrum. This type of general inflation is usually caused by consumer demand, changes in spending behavior, and a tighter labor market.
• Disruptions to the supply chain. Wildfires in the western United States, widespread droughts, and the continuing war in Ukraine are affecting food supply chains. This reduces the amount of food in circulation and drives up grocery prices.
• High transportation costs. Fuel prices have been high throughout 2023, which means it’s more expensive to transport food.
• Lingering effects of COVID-19. The pandemic disrupted markets, crops, food-industry businesses, and supply chains. Some haven’t recovered completely, putting stress on other areas of the market, reducing food security, and contributing to food inflation.

Experts’ inflation expectations are high through 2024. The USDA anticipates that prices in the United States will rise by 2.9% over the year.

How to cut food costs

With food inflation here to stay, at least in the near future, many restaurant owners are finding ways to cut costs. While this strategy won’t make up the difference completely, it can help soften the blow.

Some ways to manage higher food costs in your restaurant include:

• Improving your inventory management. Reduce spoilage with a first in, first out (FIFO) approach to inventory use — and make sure to train your staff thoroughly. This is particularly important for perishable items or any ingredient with a high food price. It’s also a good idea to reduce over-ordering using inventory management software that recommends quantities based on past years’ sales data.
• Creating and sticking to a budget. You might not control food price inflation, but careful budgeting ensures you’re not overspending in other parts of the business. A budget template helps you identify and track expenses for each area of restaurant operations.
• Making cuts to your menu. Are there any menu items that don’t sell well? Do any dishes use expensive ingredients? Consider pulling them until the food inflation rate slows; that way, you don’t need to worry about buying or storing the ingredients.
• Embracing local ingredients. Because local foods don’t have to travel far to reach you, they’re often more affordable.
• Revisiting your menu pricing. Consider increasing the food price strategically to improve profit margins. You can change menu pricing across the board or on a dish-by-dish basis.
• Negotiating with suppliers. Reach out to vendors to ask for a more favorable food price. They may be willing to reduce prices if you agree to exclusivity or send more of your business their way.
• Reducing food waste. Track all food you throw out and analyze the source. If customers aren’t eating the full portion, reduce the size slightly; you’ll save on food expenses without impacting revenue. Is the kitchen crew contributing to waste? Train cooks on efficient prep strategies.

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