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Why the price of groceries is going up faster than a meal out

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People eating in a busy restaurant in the Moynihan Train Hall in Manhattan

Restaurant owners are cautious about raising prices as inflation rises because they don't want to drive customers away. Spencer Platt/Getty Images

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Overall, food costs are up almost 11% over the past year. But if you drill a little deeper into that number, you’ll find an Interesting detail: The price of eating out has risen only a little over half as much as the cost of eating at home.

What gives?

Well, eating is a necessity. Eating out is not. And that is one of the main reasons Sucharita Kodali at Forrester Research said restaurants have been slower to raise their prices.

“If restaurants were to raise their prices too quickly, many of them would probably see people pulling back and going back to grocery stores,” Kodali said.

Or going to another, cheaper restaurant instead. 

That’s what Fiore Tedesco III is worried about. It’s why his restaurant L’Oca d’Oro in Austin hasn’t increased prices in the last year.

“I’m really nervous about raising prices and making it a more expensive experience for our guests,” he said.

Instead, so far Tedesco’s been changing up the menu a lot and designing dishes around cheaper ingredients.

“We’re serving an eggplant milanesa on the menu right now,” Tedesco said. “A few months ago, that was a chicken milanesa. That’s my main solution: serve more vegetables. I think we’re really good at it and we can control the cost a little more.”

But, he said, that’s getting harder because everything is getting more expensive. Not just food, but labor too. 

“When you go to a restaurant, you’re not just buying food, you’re buying restaurant services,” explained Laura Veldkamp at Columbia Business School. “So, the price that you pay for a restaurant meal helps to cover the rent of the restaurant, and helps to pay for all the servers, for the dishwashers, for the cook.”

And even though all of those costs are rising, they aren’t rising as quickly as the cost of the food itself.

“And so the restaurant meal increases by less,” Veldkamp said.

But it may also just be a matter of time. 

Tedesco at L’Oca d’Oro said it’s getting harder to keep absorbing all the increases.

“So we’re likely going to need to raise prices up to 10% sometime in the next several months,” he said.

But he’s slow rolling it as much as he can.

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