As fast food and fast food chains continue to grapple with inflation and related costs, another American restaurant has announced it is increasing menu prices to offset expenses.
Olive Garden, whose parent company Darden Restaurants reported its fiscal fourth-quarter and full-year 2024 earnings on Thursday, said it expects prices to rise slowly to keep in line with inflation over the coming year.
“The good news about prices is that we've actually kept prices very modest over the last five years, so we expect prices for this year to be more in line with inflation, so in that 2.5% to 3% range. % (growth). maybe,” said Darden Restaurants CFO Raj Vennam during the revenue call. “But as we think about how it will spread, we expect it to be more consistent quarter over quarter.”
Olive Garden had a relatively weak quarter, posting a 1.5% quarterly decline in same-store sales, although Vennam noted that the chain's same-restaurant guest count was 60 basis points higher than the benchmark for the fast casual industry.
“If you look over the last five years, we've undercut a lot, and that gives us some flexibility, and we've talked about that before,” Vennam explained, noting that Olive Garden raised prices by about 1% in the quarter fourth. . “We feel like we've done a lot of work to keep prices down and we'll continue to do so.”
Darden explained that the general concern for the business now is the consumer group that is below the median household income, about $75,000 a year.
“Consumers are generally concerned about inflation and they're becoming more concerned about the labor market. And what we're seeing are some changes in behavior that we were already starting to see,” Darden Restaurants CEO Rick Cardenas told investors on the call of Thursday.
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Inflation has become a widespread issue for fast casual restaurants across the country, including Red lobster, which was introduced for Chapter 11 bankruptcy last month.
“The consumer is really focused on the price they're paying everywhere, not just in restaurants,” Cardenas said. “And if you think about the cost they have for non-discretionary costs, they've been growing faster than wages for many years, and that separates discretionary spending.”
“Shark Tank” star Kevin O'Leary also spoke about this restaurant closings and how consumers shouldn't expect it to stop anytime soon.
“Supply chains crippled by the lockdown of the Covid pandemic have not recovered. Food costs — especially for proteins like chicken, beef and seafood — have risen 30 to 40 percent over the past 36 months,” O'Leary. wrote in an op-ed last week. “Worst of all for restaurant industry – customers not coming back from closings.”
Darden Restaurants was down up 8.5% year over year on Friday afternoon.