Food costs hurting restaurants, but Darden won’t raise prices

Published on
October 1, 2021
An Eddie V's Prime Seafood, a chain owned by Darden. Darden has vowed to avoid raising prices in spite of rising costs.

Most U.S. restaurants are paying more for food, labor, and rent, according to a new survey, and a trade group representing the industry is concerned that the sector's recovery will be pushed well into 2022.

The new National Restaurant Assocation survey found 91 percent of restaurant operators are paying more for food, 84 percent report higher labor costs, and 63 percent are paying higher occupancy costs. Additionally, 95 percent of restaurant operators said their restaurant experienced supply delays or shortages of key food or beverage items in the past three months. At the same time, restaurants’ profitability is down as 85 percent of operators reported smaller margins than before the pandemic.

A majority of full-service and limited-service operators say business conditions are worse now than three months ago, and 44 percent of operators said they think it will be more than a year before business conditions return to normal. Nineteen percent of restaurant owners said they believe business conditions will never return to normal.

“Our nation’s restaurant recovery is officially moving in reverse,” NRA Executive Vice President of Public Affairs Sean Kennedy said in a press release. “The lingering effects of the delta variant are a further drag on an industry struggling with rising costs and falling revenue.”

The NRA and the Independent Restaurant Coalition continue to urge the U.S. Congress to replenish the Restaurant Revitalization Fund.

“Nearly 200,000 neighborhood restaurants and bars across the country are in danger of closing permanently unless my colleagues take action,” U.S. Rep. Earl Blumenauer (D-Oregon), the original sponsor of the Restaurant Revitalization Replenishment Act, said at a press conference in Washington D.C. “The catastrophe that looms ahead will inflict damage to the economy that we cannot comprehend. We will continue to stay loud until every restaurant and bar who needs help gets it.”  

Despite rising food costs, Orlando, Florida, U.S.A.-based Darden recently announced it has no plans to raise prices at the restaurant chains it operates, which include LongHorn Steakhouse, Olive Garden, Capital Grille, and Eddie V’s Prime Seafood. The company produced better-than-expected earnings in Q2 2021, but said it was facing supply chain challenges that could hurt its financials through the remainder of the year.

Darden predicted overall inflation at 4 percent for the current fiscal year and said it is experiencing soaring food costs, but Darden said it doesn’t plan to pass those costs along to consumers.

”We want to make sure this big group of consumers that we service feel as though they can still come to our restaurants and get an extremely great value for what they have to pay," Darden CEO Gene Lee said on an earnings call, per Eat This, Not That!. "Because at some point, your average consumer could get priced out of casual dining if it costs too much.”

Darden’s Q1 2021 sales jumped 51 percent to USD 2.3 billion (EUR 1.9 billion), driven by 47.5 percent same restaurant sales growth and the addition of a net increase of 34 restaurants nationally.

“Our sales results were better than expected, requiring us to go out and purchase more product on the spot market – in particular proteins, as our LongHorn and fine dining segments had the largest sales outperformance versus our expectations,” Darden Senior Vice President, Chief Financial Officer, and Treasurer Raj Vennam said on an investor conference call.

Spot prices for proteins were as high as 30 percent above Darden’s contracted rates, Vennman said.

Photo courtesy of Felix Mizioznikov/Shutterstock

Contributing Editor



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