10 ingredients that got considerably more expensive for restaurants this year

Everyone has felt the pain of inflation at the grocery store. For restaurant owners, whose bottom line is directly impacted by food costs and diners eager to order out—rapid cost increases can spell disaster. While people are still eating out, with fast-casual dining and coffee shop patronage up in 2023, visits to sit-down restaurants decreased in the second and third quarters of 2023, according to location analytics firm Placer.ai.

Find Businesses 4 Sale used Bureau of Labor Statistics data to identify 10 common restaurant ingredients whose prices escalated faster over the past year, pushing restaurant prices higher in turn. This analysis is based on annual inflation rates in March 2024.

The overall inflation rate in March was 3.5%, driven by rising costs of shelter and gasoline. This remains above the target 2% inflation rate the Federal Reserve typically aspires to. Inflation among groceries overall was actually more moderate, with costs rising just 1.2% over the past year. At the same time, the cost of eating out exceeded overall inflation, growing by 4.2%.

This is consistent with traditional markup trends at restaurants: Eateries typically charge double or triple what the ingredient costs them wholesale to cover other expenses and turn a profit, so higher food costs translate directly to higher prices for diners. At the same time, restaurant profit margins remain low—around 5% on average, with some variation depending on the kind of establishment. Food costs represent about a third of restaurant expenses, so increases in the cost of key ingredients can cut deeply into a restaurant's profitability.

Raising prices is often a last resort for restaurants that don't want to drive away customers—and when they do make increases, they attempt to do so gradually. This means some may still be increasing costs to level out the rampant inflation of 2022.

Labor comprises another third of restaurant expenses, so some of the higher pricing at restaurants is in response to increasing labor costs. Twenty-two states increased their minimum wage this year, which is especially pertinent to an industry that employs high numbers of minimum- and low-wage workers, according to an Economic Policy Institute analysis. Indeed, establishments particularly known for employing massive numbers of low-paid workers, such as fast-food restaurants and other limited-service restaurants, raised prices more than their full-service counterparts.