We are all familiar with the old story of frog and pot of water. If you put a frog in pot of boiling water, the frog will immediately leap out. But, if you put a frog in a pot of room temperature water and slow bring it to a boil, the frog will not notice the gradual change and be boiled to death. The moral of this story is that we are less likely to realize small changes over a period time than an abrupt one.
When it comes to the price of eating out, I am feeling like the frog in the room temperature pot. I just realized recently that the prices are ridiculously high and I am feeling gouged. For a seemingly analytic fellow, a professor in a school of business, and a teacher of microeconomics, I am feeling pretty froggy about this later realization.
Of course, I noticed some disparities over the past few years, especially when I travel to places outside of Chicagoland and am pleasantly surprised by how affordable restaurants are in rural areas. These past few days, however, hammered home just how much prices have risen. First, we went to a fast-food restaurant. We were a party of four and the bill was over $50. The very next day, the same party of four went to my favorite local breakfast joint. The bill there with tip was $89!
To be honest, the fast-food restaurants was always on the pricier side of fast-food joints and the breakfast place was also on the upscale side of Greek diners. But, dang, the prices got my attention. It was like a switch flipped and I will probably opt for a visit to the grocery store and doing some grilling at home a lot more moving forward.
On February 13, 2024, CNN posted Surging restaurant prices are making dining out a luxury.
… it’s becoming increasingly cheaper for Americans to eat at home instead of dining out, according to January Consumer Price Index data. That’s because prices for groceries are up 1.2% year over year, while the price of food consumed at restaurants is up 5.1%.
In January 2023, it was cheaper to dine out, with food prices up 8.2% compared to the prior year. Grocery prices were up 11.3% year over year.
What’s behind the shift?
In the post-pandemic world, consumers have been devoting more of their budgets to services compared to goods. Demand for services has been putting upward pressure on wages, which, in turn, has contributed to price increases.
I believe it has even got worse since then. Per the graphic from Reddit, McDonald’s prices for five core items has increased 141.4% from 2019 to 2024. A similar look at Taco Bell and Chik-fil-A showed increases of 57.4% and 80.1% respectively. My go-to Grande Americano now costs me $3.95. I blogged about the same drink going from $2.20 to $2.48 in 2012 (Starbucks Brewed Communism) and was shocked at that 28 cent increase.
Businesses can raise prices. It is their prerogative. Consumers can choose to continue frequenting their restaurants or not. Restaurants control the prices. Consumers decide which quantity they are willing to buy at prices the restaurants are charging.
I have been pretty used to making a quick decision to go out for a meal. From what I can tell, others seem to do the same. The restaurants all seem to do well. I do believe I will be cutting back on going out for the foreseeable future. The prices are out of whack.
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