It May Soon Be Cheaper To Eat Out Than At Home. Here's Why

For many cash-strapped families, the most efficient way to save money on meals may come from a surprising source: restaurants. According to one of the world's top financial groups, increasing numbers of consumers may turn to dining out as a way of saving money in lieu of unprecedented upticks in grocery prices, per a press release.

In March, the U.N. reported that food prices around the world had hit a record high as a result of the Russian invasion of Ukraine and other ongoing supply chain and environmental issues (via Reuters). And according to USA Today, in May, inflation rates hit a new 40-year high, sending grocery prices soaring, marked by an 8.6% annual increase in the overall consumer price index.

Recent findings from the USDA's Economic Research Service determined that food prices as a whole were up 9.4% from April 2021 to April 2022. Notable price increases on everyday grocery items included a 5% increase in the cost of eggs, a 3% increase in the cost of chicken, a 2.2% price jump for fish, and a 3.1% increase for the cost of cookies, cupcakes, and cakes.

These price increases — which have continued to rise month after month — compounded by similar upswings in gas and rent costs, have added financial pressure to countless individuals and families around the country, and experts say there is no relief in sight.

The cost of food will continue to increase over the next year, experts say

The Consumer Price Index forecast by the for 2022 by the USDA has predicted sharp increases in the costs of just about every common grocery item over the coming year, including meats (a 6.5–7.5% increase), eggs (19.5–20.5%, due to an uptick in avian flu), poultry (8.5–9.5%), dairy products (7–8%), fish and seafood (7–8%), fats and oils (10–11%), fresh fruit (8.5–9.5%), and bakery products (7–8%).

Although individual consumers, restaurants, and food service providers alike have felt the financial burden of inflation, economic models indicate that the cost of eating out will increase by a smaller margin than the cost of groceries.

A recent Consumer Price Index Summary by the U.S. Bureau of Labor Statistics noted that while the cost of food-away-from-home purchases rose by 7.4% over a 12-month period ending in April, the cost of food-at-home purchases rose by 11.9% over the same period, indicating a greater increase in the cost of groceries over dining out.

This economic trend is expected to continue throughout the coming year. According to the USDA, while food-away-from-home costs (from restaurants, fast food chains, and other food providers) are expected to increase between 6–7% in 2022, food-at-home prices will rise an anticipated 7–8%.

The cost of restaurant food has increased at a lower rate than grocery costs

The inconsistency in the increase of restaurant versus grocery prices comes down to certain economic and supply advantages food service providers have over average consumers. Despite elevated supply costs, "restaurant chains have been able to achieve lower food-rice increases and delay the effect of inflation thanks to a number of advantages they enjoy," said Nick Cole, head of Restaurant Finance at Mitsubishi UFJ Financial Group, in a press release

These advantages include forward contracts that enable restaurants to lock in lower long-term supply prices, access to wholesale food prices, and menu flexibility that enables restaurants to use similar ingredients in many different ways.

Although this data doesn't take into account other economic factors — such as the price of fuel getting to and from restaurants and grocers — it does indicate that purchases from fast-casual and quick-service restaurants, which offer meals at more conservative price points than sit-down restaurants, may increase as more and more consumers seek out ways to lower food costs.

However, serving an increased number of customers comes as a challenge to the restaurant industry, which continues to struggle with widespread labor shortages (via NCCUS). According to the National Restaurant Association, three out of four restaurant owners consider hiring and retaining employees to still be their greatest challenge over two years since the onset of the pandemic, indicating that there's no easy solution to the ongoing global food crisis continuing to plague consumers worldwide.