Chains act to offset pricing pressures. Dunkin’s modernization effort is ahead of schedule. Consumers will gobble up a lot of chicken wings watching the big game. These stories and more This Week in Foodservice.

Price increases continue to wreak havoc throughout the restaurant industry. For example, McDonald’s predicts costs for food, paper, plastic and other supplies will roughly double this year. Other chains, including Starbucks, have also indicated their costs continue to skyrocket. To offset cost increases, operators continue to search for ways to raise prices without driving away customers.

The Wall Street Journal reports McDonald’s is working with franchisees to alter combo meal prices so as not to invite competition or scare off customers. The burger giant has also permitted franchisees to increase prices on some beverage items after discounting them for years.

Domino’s reduced the number of chicken wings it offers customers in one menu item, citing rising costs. Little Caesar’s raised the price of its “Hot & Ready” by 50 cents, justifying the additional charge by adding two slices of pepperoni. Burger King changed its pricing because the chain felt too many discounts were confusing customers. BK is also considering taking its signature Whopper off the chain’s value menu.

None of these challenges are the unique purview of restaurant chains, mind you. Operators from all segments continue to come to terms with rising food and labor costs while dealing with the rollercoaster of regulations that accompany a pandemic heading into its third year.

The problem with these moves is that basic economics teaches us that increasing prices will likely reduce sales. Operators in the price-sensitive restaurant industry, including chains, are well aware of this. So the question operators are really asking themselves is: how much will sales decline if they raise prices?

Given the depth and complexity of these challenges, it seems likely they will persist through 2022. But some basic factors are working in favor of the restaurant industry. Take, for example, the fact that 51% of consumers are not using restaurants as much as they would like, per data from the National Restaurant Association. So, the demand remains intact. Now the industry just needs to tame a few of these challenges.

Economic News This Week

• Initial jobless claims decreased by 23,000 for a total of 238,000 for the week ending January 29, 2022, per the U.S. Department of Labor. The 4-week moving average hit 255,000, an increase of 7,750.
• U.S. employment declined by 301,000 jobs in January, per data from payroll processing company ADP. Small firms (1 to 49 employees) lost 144,000 jobs, medium-size firms (50 to 499 employees) lost 59,000 workers and large firms (more than 500 employees) lost 98,000 employees. The hospitality and leisure sector, which includes restaurants, saw employment fall by 154,000.
• Hiring in the U.S. far exceeded forecasts for expanding payrolls in January. New hires totaled a healthy 467,000 in January, per data from the U.S. Bureau of Labor Statistics, which is twice as much as most projections. Despite these gains, the unemployment rate crept up to 4.0% from 3.9% in December.
• The New York Federal Reserve’s Empire State Manufacturing Survey reported business activity abruptly leveled off in January. The General Business Conditions index dropped to -0.7, a 32.6-point decline. The New Orders Index also went negative at -5.0, which represents a 32.1-point dip from December. The study did not offer many signs conditions will improve in the near future.

Foodservice News This Week

• Foodservice and drinking places added a phenomenal 108,200 employees to their payrolls in January, per the U.S. Bureau of Labor Statistics. Thus, 24% of the workers hired in the private sector last month were added to foodservice payrolls.
• Dunkin’s $100 million modernization program is ahead of schedule. The chain has reduced the number of food items on its menu while adding more hot and cold beverages. As part of this initiative, Dunkin’ has relaunched its line of lattes, cappuccinos and espresso-based beverages. The chain is also upgrading its equipment, installing drive-thru lanes and displaying bakery items in the front of the stores.
• Domino’s Pizza was certainly in the right spot at the right time when the pandemic hit thanks to a business model that emphasizes takeout and delivery. But the fact is that Domino’s had been a solid performer even prior to the pandemic. Still, Domino’s stock is up 1,500% in the past decade so it is not terribly surprising that the Motley Fool gave Domino’s it's rare “All In” rating.
• It seems consumers love to pair football watching with chicken wings. Americans are anticipated to devour 1.42 billion chicken wings as part of their Super Bowl celebrations, according to the National Chicken Council‘s 2022 Wing Report. Like most ingredients, they might cost a little more but a spokesperson for the NCC promises there will be no shortage of wings.
• Chicago-based foodservice market research Datassential has acquired CHD Expert. The 25-year-old CHD Expert collects, analyzes and manages global foodservice and hospitality data spanning more than 60 countries.
• US Foods plans to open two more of its CHEF’STORE retail locations. One unit is in Visalia, Calif., and will mark the broadliner’s 14th location in the state. The other unit will be in Lynchburg, Va., the first location for that state. CHEF’STORE stocks a variety of food items as well as beverages, catering items, janitorial supplies and other restaurant essentials. US Foods acquired Smart Foodservice Warehouse stores in April 2020 to accelerate growth in the cash and carry market and rebranded all Smart Foodservice Warehouse stores to US Foods CHEF’STORE in February of 2021. With the addition of the two new stores, US Foods will proudly own 82 CHEF’STORE locations across the continental United States.
• Growth Chains: The Big Chicken chain, partially owned by former NBA star Shaq O’Neil, continues to add units by opening in sports arenas and also working with ghost kitchen operations. New York-based Serafina will open eight units of the Italian restaurant’s new fast-casual concept called Serafina To Go. Each location will be in the New York City area. Serafina will also open a 5,000-square-foot unit in Midtown New York called Café Serafina later this month.
• Comparable Store Sales Reports: Starbucks up 18%.

For comparable-store sales reports for other chains, please click here for the latest Green Sheet.