10 Things Restaurant Owners Wish Customers Understood About “Outrageous” Prices

Pricing is a hot topic these days, and everyone from your neighbor to your favorite corner market are feeling the pain, and looking for ways to boost their bank accounts. Restaurant owners are no exception, and they have found themselves in a particularly tricky spot thanks to the rising costs of both food and labor.

As such, many are left walking a careful line between turning a profit and losing cash strapped customers. We reached out to a handful of restaurant owners to find out what they want their customers to know about restaurant pricing so you can better understand what is driving those rising menu prices.

Inflation is everywhere. According to the USDA Economic Research Service, the Consumer Price Index for Food showed a 3.4% year-over-year increase to diners in January 2025.

"Ingredient prices can be unpredictable — sometimes they spike so much that we barely break even on certain dishes, even with careful pricing."

Often measured in a percentage, a margin represents the amount of profit a restaurant receives after the costs are deducted from the sales price. Most data indicates that restaurant profit margins could span from 0-15%. However, the 2025 from Toast shows most restaurants make somewhere between 3-5%.

To put that into context, a restaurant could be making as little as 45 cents for every $15 entree sold.

Many restaurants use a practice called menu engineering to get people in the door. This involves advertising a popular menu item that, when sold alone, doesn't make the restaurant any money. But these items, called loss leaders, are meant to be paired with more profitable items like drinks and sides, which help offset the cost.

This is something that Abhishek Mediratta, founder of Fresh Burrito in Canada wishes more people understood. "The sales or deals customers see at a restaurant are simply tactics to invite more customers or first-time sales," Mediratta says. "Due to the high overhead costs, often a restaurant makes close to nothing on these discounted items."

The National Restaurant Association shares that tips are critical to restaurant financial health.

That's because the cost of labor would create too large of a financial burden on most restaurants, resulting in substantially increased food prices, reduced hours for employees, and shuttering their doors. That would then impact all suppliers and farmers, and the community as a whole.

As consumers work to get ahead financially, they often target eating out as an unnecessary expense. That's disastrous for restaurants. Not only that, but Mark Bucher, co-owner of Medium Rare Restaurants in New York says it creates a unique challenge for restaurant owners.

"While food costs only make up 30-35% of total expenses, a small price increase on a single item doesn't drastically affect the overall balance," he explains. "However, a drop in sales can impact everything by 100%."

Some restaurants have moved to collect a card to reserve seating so they can apply a "no-show" fee if the customer doesn't show up for their meal. Most organizations don't want to do that, but they feel they have to as a result of the incredible loss missed reservations create.

That's especially true when you consider smaller establishments that could be missing out on a large percentage of their sales when they block off a chunk of their dining room for a party that never shows up.

Data shared by the National Restaurant Association notes that food prices have increased by 29%, and labor costs have increased by 31%, in the period from 2020 to 2024.

To cover inflationary pressures, even as customer counts remain lower than pre-pandemic levels, restaurant owners have increased menu prices by an average of 27.2% across the industry.

Restaurant prices are rising faster than grocery store prices, according to data from the Consumer Price Index. Some of the factors that contribute to this include increased labor costs, supply chain disruption, inflation, and even energy costs.

As such, diners should expect to pay more for menu items than they would if they prepared them in their own kitchen. Yes, even the seemingly low overhead items like salad will cost more at your favorite eatery, even if you think you could whip up the same thing at home for a fraction of the cost.

While the cost of food remains a critical component of food pricing in restaurants, it's not the only factor to consider, or all restaurants would charge about the same. Things like brand positioning, type of cuisine, the skill that goes into making it, customer demographics, and even regional competition can all play a part in menu pricing.

Restaurant owners aren't really in it to hurt the customer — they love feeding you. However, communicating why they have to raise prices isn't easy. Many restaurant owners and employees have said that they want to be able to offer a personal, authentic explanation to customers when they have to increase prices, but it's not always easy to clearly communicate what's going on behind the scenes.

Ultimately, if your budget requires you to cut a few things out in order to lower your financial stress, it makes sense that an extravagance like dining out could be the first to go. But, after seeing how restaurant owners are feeling the same pinch when it comes to budgeting, you may feel compelled to look elsewhere when trying to save a few bucks.

Instead of cutting restaurant dining completely out of your financial plan, consider limiting the number of times you go out to eat instead. Not only will this help you save a bit of money, but it will also keep your local restaurant scene alive and well for when you're ready to return to your regular spending habits.