As inflation continues to rise, restaurant owners are facing mounting pressure to adjust menu prices, navigating the delicate balance between maintaining profitability and preserving customer loyalty. Many operators, including Michael Brafman of The Sandwich Board in New York City, are struggling with steep increases in protein costs and the challenge of raising prices without alienating cost-conscious diners. The National Restaurant Association estimates that a 31% price hike is necessary to maintain a 5% profit margin, prompting many operators to consider raising prices as a final resort.
Restaurant management software company Toast recently released its 2025 Voice of the Restaurant Industry Survey, revealing that improving profitability was the top concern for operators heading into next year. Operators ranked inflation (20%), marketing (16%) and hiring (16%) as their top three business pain points. Nearly half of all 712 restaurant decision-makers surveyed (48%) said they plan to increase menu prices if inflation continues to be a factor.
The National Restaurant Association estimates that, to maintain a 5% profit margin, the average restaurant needs to raise prices by 31%, according to data compiled by the D.C.-based industry trade group earlier this year. “Raising menu prices is typically a last resort for restaurant operators, but with the rising costs of food and labor, their operating math still has to work,” Chad Moutray, chief economist for the National Restaurant Association, told Fox News Digital.
Small business owners like Brafman are concerned about the impact on their customers. “The basic math is whatever product you have, you divide it by 0.3, and that’s what the product should cost to the consumer to operate at that healthy margin,” Brafman said. “If the prices continue to increase, there’s only [so much] that the consumer will be willing to pay.” He noted that during the egg crisis, he had to make difficult decisions about raising prices, but ultimately, “nobody’s spending $17 on an egg sandwich just so you can keep your margins.” While he made a marginal increase, the change was met with concern by some customers.
Restaurant operators like John Loeffler, innkeeper and chef at The Inn at Gristmill Square and Waterwheel Restaurant in Virginia, are also dealing with similar issues, albeit at different price points. Loeffler observed a significant increase in the cost of beef, which is a popular item at his restaurant. “Beef is always a huge, huge seller for us. It is one of our more popular items,” he said. “In June, a whole loin of certified Angus ribeye cost $14.75 a pound, and today, it’s $17.99.” As costs climb, the challenge of keeping guests happy extends beyond just the food, requiring operators to add value while maintaining higher prices.
Loeffler, who has been in the business for 30 years, emphasized the importance of maintaining a positive dining experience. “At the end of the day, we’re in the business of taking care of people, nourishing them, making them feel good, and making them feel good about spending money. That’s our job,” he said. This sentiment highlights the broader struggle faced by restaurant owners as they navigate the financial realities of inflation while striving to satisfy their customers’ needs and expectations.