Chains Absorb Costs to Keep Customer Base

Despite the high cost of doing business these days, some restaurant chains have opted to absorb the impact of price hikes instead of passing the entire bill along to consumers.

For instance, Starbucks, which traditionally raised prices to compensate for higher input costs, has stated that it is not planning any price increases through Sept. 2009. Other chains, such as McDonald’s, Olive Garden (owned by Darden Restaurants) and Chipotle Mexican Grill have made some price increases, but not at the same rate as their expenditures—in effect, splitting the cost with consumers.

However, a representative from Chipotle—while acknowledging the desire to not unduly increase prices—noted, “You can only survive or thrive with mediocre margins for so long.”

Source: Reuters
“Restaurants Risk Margins to Keep Prices in Check”