Operations

Restaurant food costs face uneven pressure in 2027 as inflation accelerates

Rising gasoline prices are adding to inflationary pressures, while ArrowStream forecasts sharply different commodity costs across restaurant segments, with chicken wings, chicken breasts and cheese among the biggest concerns.

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October 15, 2026 by Valerie Gritton — Editor, Connect Food

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Restaurant operators are heading into 2027 facing an uneven cost environment, with inflation accelerating and key food commodities expected to become significantly more expensive for some items while remaining relatively stable for others.

U.S. consumer prices rose 3.7% year over year in September, up from 3.4% in August, according to the Bureau of Labor Statistics. The Consumer Price Index increased 0.6% for the month, with gasoline prices jumping 9.1% and accounting for more than half the monthly increase. Overall energy prices climbed 5.2% and were 20.4% higher than a year earlier.

Food prices were unchanged overall in September. Grocery prices declined 0.1%, offsetting a 0.2% increase in food away from home. Over the past year, food prices rose 2.5%, while food away from home increased 3.5%.

For restaurants, however, the broader inflation picture tells only part of the story. The cost pressures facing an operator depend heavily on the menu, the ingredients used most frequently and the expenses involved in moving products through the supply chain.

ArrowStream, a foodservice supply-chain intelligence and forecasting company, tracks these differences through its Restaurant Commodity Index, which measures how projected commodity costs could affect different types of restaurant concepts.

The forecasts draw on a network of more than 150,000 operator locations, more than 1,600 distribution locations and 250-plus restaurant brands, along with ArrowStream's commodity forecasting models and decades of foodservice supply-chain history.

Its latest projections show notable differences in commodity costs from 2026 to 2027. Fast-food concepts are projected to see an 8.1% increase, followed by pizza at 7.9%, fast casual at 7.3%, Mexican restaurants at 6.5% and family dining at 6.3%. Casual dining is forecast to see a more modest 3% increase, while the steakhouse commodity index is expected to remain essentially flat, declining 0.1%.

These projections reflect changes in underlying commodity costs, not anticipated menu-price increases. How much of that pressure ultimately reaches consumers will depend on operators' margins, pricing decisions and their ability to absorb higher expenses.

Chicken, cheese and menu mix drive divergent forecasts

Why the difference between restaurant segments? Much of it comes down to what's on the menu.

Some ingredients that provided cost relief in 2026 are projected to reverse course in 2027. ArrowStream forecasts chicken wing costs will rise 42.2% next year after declining 23.7% in 2026. Chicken breast costs are projected to increase 21.3%, reversing a 27.4% decline this year.

Cheese costs are also expected to rebound, rising 13.1% in 2027 after falling 13.4% in 2026. Ground beef costs are projected to increase another 2.3%.

Those shifts could create significant pressure for restaurants that rely heavily on wings, chicken breast and cheese. The effect on an individual operator's total food costs, however, will depend on purchasing volumes, menu mix and the proportion of overall spending allocated to those ingredients.

Steakhouses face a different commodity outlook. Several premium beef cuts are projected to remain relatively stable or decline, helping to keep the overall steakhouse commodity index essentially flat next year.

Protein markets point to a potential reversal

Despite the projected increases, several major restaurant ingredients have been relatively inexpensive in 2026, according to David Maloni, senior director of commodities at ArrowStream. That relief, however, may not last.

Cheese prices in September were the lowest for that month since at least 2015, while pork bellies, which are used to produce bacon, recorded their lowest September average since 2019, Maloni said. Chicken prices also have remained low, with chicken breast prices reaching their lowest September average in the period tracked by ArrowStream.

Maloni said chicken and pork producers are beginning to slow production in response to low prices, a development that could put upward pressure on costs in 2027.

For restaurants that rely on chicken, bacon, sausage or pepperoni, the potential shift reinforces the importance of looking beyond current market prices when making purchasing and menu decisions.

Beef presents a different challenge. U.S. beef production is tracking about 5% below year-ago levels, reflecting a cattle herd that has contracted significantly over the past eight years due to drought and previously elevated feed costs, which have discouraged herd expansion.

However, there are signs of potential relief. Conditions in parts of the Southern Plains, including Texas, Oklahoma, Kansas and Missouri, have begun to improve, potentially supporting cattle production over time. But rebuilding herds takes time, and any meaningful supply improvement could be 18 to 30 months away.

Restrictions on Mexican cattle imports have added another layer of uncertainty. Mexican cattle historically account for about 5% of the supply entering U.S. feedlots, Maloni said. Import volumes have recovered only partially, and a return to normal levels remains uncertain.

Higher retail beef prices also are challenging consumers, prompting some to reduce consumption or trade down to less expensive proteins. Maloni expects beef prices to remain relatively flat if imports continue to recover, although the outlook depends on how supply develops.

Dairy costs tell a more complicated story

Dairy markets illustrate why a single commodity price cannot tell operators everything they need to know about ingredient costs.

The U.S. dairy cow herd is at its largest level since 1993, contributing to greater milk availability and relatively inexpensive cheese. That has helped provide relief to restaurants such as pizzerias, and food manufacturers that rely on cheese.

Other dairy ingredients, however, are experiencing a different trend.

Maloni said nonfat dry milk prices were within 10 cents of their record high, while whey prices had reached an all-time high.

Transportation costs add another layer of pressure

Food commodities are not the only concern for restaurant operators. Higher diesel prices and rising freight rates could compound the pressure on food costs.

Maloni identified diesel and freight as his biggest concerns heading into 2027, warning that elevated transportation expenses could continue to affect product prices.

That creates a challenge even when an individual ingredient remains relatively inexpensive. Restaurants must account for the full cost of getting products from producers to distributors and ultimately to their kitchens. For operators already managing tight margins, rising freight expenses could make it more difficult to offset increases in high-volume ingredients.

The September inflation report adds to those concerns. Although food prices were unchanged overall for the month, gasoline prices rose sharply and overall energy costs accelerated. Core CPI, which excludes food and energy, increased 0.3% for a second consecutive month, while annual core inflation rose to 2.6%, up from 2.4% in August.

The report does not establish how much of the increase in transportation expenses will be passed through to restaurant distributors or operators. It does, however, highlight the broader energy-cost environment that businesses will need to monitor alongside commodity prices.

Menu prices and margins remain in operators' hands

Toast's September Menu Price Monitor offers a consumer-facing view of inflation.

According to the Toast report, Regular coffee reached a median price of $3.79, up 7.1% year over year, while cold brew climbed to $5.72, a 4.2% increase. Beer rose 2.8% to $6.65, and burgers increased 2.2% to $14.80.

Chicken wings, meanwhile, rose just 0.7% year-over-year to $13.87.

The pressure to manage food costs comes as restaurant operators contend with thinner margins, price-sensitive consumers and rising expenses across their businesses. This has led to a host of bankruptcy filings with the most recent one by Wendy's 300-unit franchisee Meritage Hospitality, who cited rising beef costs, among other challenges, as reasons for the filing.

The outlook for 2027 reinforces the need for operators to understand their exposure to individual commodities, monitor purchasing and labor costs, and make pricing decisions that balance customer value with financial sustainability.