Operations

6 ways tariffs could increase fast casual food costs

April 2, 2025 by Joe Hannon — GM, Inventory & Sales, Restaurant365

The U.S. restaurant industry is feeling the squeeze as tariffs continue to drive up the cost of imported goods. The National Restaurant Association estimates that a 25% tariff on food and beverage products imported from Mexico and Canada could cost U.S. restaurants more than $12 billion. At the same time, inflation pressures are also weighing in, with the Consumer Price Index showing a sharp 0.4% rise inmenu prices in February 2025 — the steepest increase since June 2024. This marks a continued trend, with menu prices climbing 3.7% over the past year, up from 3.4% in January.

For fast casual restaurants, these rising costs are hard to ignore, especially as key ingredients begin to see price hikes. The impact is being felt across the board, from chicken and beef to potatoes and fresh produce. As restaurant operators face the challenge of balancing rising costs with maintaining menu quality, understanding how tariffs are affecting these common ingredients is crucial for making informed decisions about sourcing, pricing, and menu adjustments.

Let's take a look at how five of the most frequently used items are being impacted by these tariff-driven cost increases.

1. Chicken

Chicken remains a fast casual favorite, from grilled sandwiches to hearty bowls. However, tariffs on poultry feed and processing materials are driving up costs for both domestic and imported chicken. The latest CPI data from February 2025 shows a 0.3% increase in prices for meats, poultry, fish, and eggs, contributing to the rising costs of this key menu item.

For restaurant leaders, this means getting creative with sourcing, rethinking menu offerings, and finding ways to keep the customer experience just as tasty — and affordable — despite the rising costs. It's a balancing act requiring operators to manage if they want to keep their kitchens running smoothly.

2. Eggs & Dairy

Eggs and dairy are essential to fast casual menus, showing up in everything from breakfast sandwiches to rich sauces and baked goods. But ongoing tariff pressures and supply chain disruptions have driven up costs, forcing operators to rethink how they source and price these staples.

Adding to the challenge, the Producer Price Index data highlights significant fluctuations in wholesale prices for chicken products. In November 2024, wholesale prices for eggs surged by more than 54%, largely due to avian influenza outbreaks that impacted commercial poultry flocks. With prices this unpredictable, some restaurants are adjusting portion sizes, modifying recipes, or negotiating new supplier contracts to help control costs while keeping customer favorites on the menu.

3. Beef

Beef remains a fast casual staple, but keeping burgers and steak-based dishes affordable is becoming a challenge. Rising tariffs on cattle feed and increased transportation costs are driving up prices, forcing operators to rethink their pricing strategies. In just one month, beef prices jumped 2.41%, and compared to last year, they're up 7.64% — a steep climb that's putting pressure on margins. Some restaurants are absorbing the costs, while others are exploring alternative proteins or adjusting portion sizes to balance affordability with quality.

4. Potatoes

For now, potato prices have remained relatively stable, with a slight 0.2% dip from January to February 2025, but that doesn't mean the industry is in the clear. Growers are already bracing for the potential fallout from a proposed 25% tariff on imports from Mexico and Canada, which could disrupt trade relationships and impact pricing down the line. With fries, hash browns, and other potato-based sides playing a major role on fast casual menus, any shake-up in the supply chain could force operators to rethink portion sizes, sourcing strategies, or even introduce alternative sides.

5. Tomatoes & avocados

Tomatoes and avocados are essential to a variety of popular fast casual dishes— think tacos, salads, sandwiches and more. However, the recent 25% tariffs on imports from Mexico and Canada are expected to drive up the prices of both. Experts predict that tomatoes could see a near 25% increase in price, while avocados, already facing challenges from labor shortages and transportation costs, are likely to follow suit with significant price hikes. This creates a double whammy for restaurants relying on these ingredients to keep their menus fresh and flavorful. Operators may need to adjust their sourcing strategies, explore local options, or find creative ways to adjust their offerings to keep costs manageable without sacrificing quality.

Navigating the challenges

As tariffs keep shaking up food prices, fast casual operators have to stay on their toes. The key to managing rising ingredient costs is flexibility and creativity. Exploring new sourcing options, diversifying suppliers, and making adjustments to menu prices or portion sizes can go a long way in balancing your bottom line. Building strong relationships with suppliers, cutting back on food waste, and keeping an eye on emerging trends will help ensure that your restaurant stays profitable while maintaining the high-quality meals your customers love.

Though tariffs remain a moving target, restaurant leaders who stay proactive and adaptable will have the edge in this ever-changing landscape. Whether it's rethinking your sourcing strategy, updating recipes, or fine-tuning menu pricing, the ability to stay informed and adjust will be crucial for weathering the storm and continuing to serve up great dining experiences.

About Joe Hannon

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Joe Hannon is the General Manager for Inventory and Sales at Restaurant365. He works with the product team to drive the vision for the operations side of the software. He cut his teeth in the industry, managing restaurants for 11 years before switching to the tech side. After a few years of implementing software, Joe decided he wanted to help build it and moved to the product team. Joe loves movie and game nights with his wife and two kids and can solve a Rubik’s Cube in under 90 seconds.

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