Dining out to become expensive as restaurants weigh price hikes

Representative Image

Restaurateurs across the country are planning to increase prices of their menu items as they struggle with high operational costs due to inflation. While surging oil price has been a concern for the industry for a while now, it is now facing inflation in several other ingredients, such as chicken, and food grains.

“We are facing inflationary pressures today with increasing cost of goods. The supply of oil, and certain food grains has been affected due to the war and COVID. Also, farmers and certain industries in the food and beverages space were not prepared for consumption to rebound in this manner, and these things are leading to disruption in supply,” Kabir Suri, president of the National Restaurant Association of India (NRAI), told Moneycontrol on the sidelines of the Cloud Kitchen Convention in Mumbai.

According to Suri, operational costs for the industry have jumped by 10-12 percent due to inflation. Most restaurants so far, he indicated, have not passed on the costs to the consumer, apprehensive that it would impact demand. However, the industry would take measured price hikes, going ahead.

“It all depends on how the forces in play such as the war pan out,” Suri added.

Several QSRs, such as KFC, Pizza Hut, and Domino’s Pizza, hiked their menu prices of late. Jubilant FoodWorks, the master franchise for Domino’s Pizza in India, increased prices by 5 percent in April after taking a 4-5 percent price hike in December.

Similarly, the franchisees of Yum! Brands (KFC and Pizza Hut) have also taken price increases of up to 10 percent, with lower increase in Pizza Hut, said a note by ICICI Securities.

KFC had taken the last price hike in November 2021, and Pizza Hut in April 2019.

Restaurant owners, however, have taken a more cautious approach.

“We are contemplating how we can contain costs and are trying our best to not pass it all to the consumer,” said Raghav Verma, co-founder, Chaayos.

The year ahead, indicated Suri, would see several restaurants increasing prices.

Rahul Singh, founder of The Beer Cafe, too, said that the company will take small price hikes, going ahead. “There will be a slight price increase but we won’t be able to pass on the entire cost increase to consumers given that they are already feeling the pinch of inflation,” he said.

The Beer Cafe operates 31 bars and cafes across India.

The president of the NRAI believes that price hikes are yet to be taken by restaurant owners, as they are negotiating contracts for the new financial year with vendors.

“People are waiting for new contracts to be signed as the financial year has just ended. So, several companies are still negotiating with their vendors and price corrections will happen, going ahead,” he said.

The restaurant industry is back to pre-COVID levels after grappling with low business due to COVID-related curbs for the last two years. Several players witnessed jump in footfalls in March following the restrictions being lifted, said Suri, adding, the quarters ahead would finally bring growth to the industry.

Deliveries, which had seen a significant jump during the last three waves of the pandemic, have subsided a bit. “The drop is however, very slight and we believe it will remain strong going ahead, as deliveries do not eat into the dine-in business,” he added.