Operations

How 3 fast casuals are handling increased food costs

Although the menus at Atomic Wings, Famous Toastery and Beef O'Bradys have little in common, their leaders are facing the same conundrum: How to raise prices to offset rising food costs without losing customers.

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August 9, 2022 by Cherryh Cansler — Editor, FastCasual.com

Food-away-from-home prices, for example, were up about 7% over 2021, and will climb another 3 to 4% in 2023, according to the USDA. It's a topic Atomic Wings CEO Zak Omar knows too well.

Beef O'Brady's launched a chicken sandwich. Provided

"Food costs have increased across the board," he told FastCasual in an email interview. "At one point, the cost of wings had risen over 100%. Now, the cost of tenders has risen 100%. Oil prices have increased the most, with the cost being up 200%. The cost of potatoes has also risen about 65%, with the cost of packaged goods increasing by over 50%."

To cover his bottom line, Omar has raised menu prices but has also found ways to innovate the menu to focus on less-expensive items.

"We introduced a bigger, juicier and crispier thigh wing this year, which provides customers with a dark meat option while also offsetting some of the high costs that are associated with traditional wings," he said. "The launch of this product has gone incredibly well."

Famous Toastery CEO Robert Maynard is facing similar issues, reporting he's paying 33% and 18% more for eggs and bacon, respectively.

"Everything across the board has gone up, even if it's not the food item itself; delivery and surcharges have gone up, too," the founder of the nearly 30-unit chain based in Charlotte told Fast Casual in an email interview.

Chris Elliot, CEO of Florida-based Beef O Brady's, which has 140 locations, told Fast Casual in an email interview that the costs of beef, chicken, fries, paper and packaged goods were up between 5% and 15%.

"Our overall cost of goods remains flat due to menu price increases and favorable wing prices," said Elliot, who hopes to avoid cutting any specific menu items by pushing lower-priced items when possible.

"We brought back Dubliner per customer request and lower COGs, and the chop steak is new to the August menu and has great COGs," Elliot said.

Gauging customer reaction

Although customers say they understand that food costs are up everywhere, they are eating out less frequently. Visits to QSRs, representing 82% of total restaurant traffic, declined 2% during this year's Q2 compared to last year's quarter, according to NPD Group. Fast casual restaurant traffic was down 1% as well.

"Consumers continue to deal with rising inflation and higher prices," David Portalatin, food industry adviser of The NPD Group, said in a press release. "We see three ways consumers

Although Famous Toastery continues to serve breakfast, it's also leaning into lunch in order to cut costs. Provided

respond to higher menu prices. They trade down to lower-priced items, cut back on the number of items ordered or reduce restaurant visits altogether."

None of those options bode well for Omar, Elliot or Maynard, however, and Portalatin advised that operators find differentiating value.

"Quality and value become a critical differentiator when consumers spend on a restaurant meal in these challenging times, " he said.

It's a strategy that Elliot is already on top, launching a "2 for $25" menu in June and increasing daily specials.

Maynard is also balancing price increases with adding value.

"We're going through a menu revamp right now," he told FastCasual. "We've been cautious about raising menu prices but you have to monitor on a daily basis. We're trying to be creative in what we do — we know where the margins are, and it's better to sell more batter than chicken salads."

Also, the chain used to focus primarily on breakfast, which is often more expensive than lunch, but is changing that as well.

"We've done so well with lunch, so we're making tweaks to the amount we sell," Maynard said. "It's one of the ways to keep pricing down.

Atomic Wings CEO Zak Omar said the cost of wings had risen over 100% and the cost of tenders has risen 100%. Provided.

Although Maynard hates to raise prices, he called it "inevitable," saying the good news was that there has never been a better time to raise prices because it won't be questioned.

The bad news: "People will draw the line at some point," he said. "You have to take it in strides and have empathy."

OperationsAtomic Wings Beef O'Brady's Famous Toastery

About Cherryh Cansler

Cherryh Cansler is VP of Events for Networld Media Group and publisher of FastCasual.com. She has been covering the restaurant industry since 2012. Her byline has appeared in Forbes, The Kansas City Star and American Fitness magazine, among many others.

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