WTF: Zagat’s Restaurant Inflation?

Here’s one of those things that make you scratch your head while mouthing the words WTF to yourself.

My friend and RM colleague Paul posted on the huge increase in restaurant prices nationwide (but not NYC), via a Zagat’s press release:

"While overall restaurant prices in NYC remain the highest in the U.S.
at $39.46 per dinner, that’s only three cents higher than last year.
… However, inflationary trends look quite different at the city’s 20
most expensive restaurants where an average meal now runs $143.06.
Since 2001, dinner prices at the city’s elite have soared at an average
of 11.6% per year, from $84.45 to $143.06."

There’s a small problem in this press release: While among all New York
restaurants, the average cost of a meal has risen only three cents
since last year’s survey — to $39.46 from $39.43,nearly 60% of survey participants say they spent more per meal this year than last year
(and we assume its more than 3 cents).   

How can this be?

Let’s look into the various aspects of that, to see if there is — or isn’t — inflation in restaurants.

To begin with, the Zagat’s are well known gourmands who are big promoters of the dining
industry. That they found prices only moderate doesn’t surprise. They are hardly neutral, skeptical observers. Perhaps
the more critical eyes of our readers here can help us delve beneath the press release to
discover if restaurant prices are actually flat. (Some people call this lawyering, I prefer to think of critically reviewing BLS or press releases as analysis; you can make your own decision).

There are a few possibilities we can explore — perhaps prices are flat, maybe its something else (I don’t honestly know). My own personal experience — and I dine out quite frequently with clients, friends and family — is that prices appear have increased substantially. We know food costs are up, rent is up, energy costs are up — and yet, overall prices, according to the Zagat’s, are flat.

To begin with, the Zagat guide is a self-reported set of reviews, where diners submit their views on food, decor, service as well as price. Since people are reporting what they spent, perhaps this is reflecting their own self-imposed budgets, rather than actual restaurant pricing. If a Zagat reviewer is limiting themselves to only spending $50 or a $100 on a meal out — perhaps they are skipping dessert, not ordering the premium dishes/specials, or not ordering beverages — then this may not be fully reflecting what restaurants charge. Instead, it reflects what the diner spent — a subtle but imprtant difference. 

Then there is the question of what the restaurants themselves are doing. As these paragraphs from the press release suggest, the restaurateurs are trying to keep costs down in a variety of ways:

Small Is the New Big: Small-plate menus are cropping up all around town including those at
L’Atelier de Joel Robuchon, Degustation and Perbacco, despite the fact that
75% of those surveyed think traditional standard-plate menus provide a better
. Additionally, smaller, more intimate neighborhood restaurants like
Cafe Cluny, Insieme, Klee Brasserie, Morandi and Waverly Inn are outpacing
last year’s theatrical, mega-restaurants such as Buddakan, Craftsteak, Del
Posto and Morimoto. [getting alot less for a little less money? sounds like inflation]

Dressed-Down Dining: The rise of these neighborhood restaurants has led to another trend – the
dressing down of dining out. White tablecloths and dress codes continue to
lose ground with the loss of fine dining establishments like Alain Ducasse,
Lenox Room and March, with not a single formal restaurant among this year’s
crop of 234 newcomers
. (emphasis added). [getting less for the same money? inflation]

Prix Fixe:  A number of top restaurants offer relatively affordable prix fixe
lunch and dinner menus, and the popular biannual Restaurant Weeks,
which we helped to create in 1992, allow diners to sample some of the
city’s finest at greatly reduced prices. [I can’t speak to elsewhere in the US, but in NYC, Prix Fixe meals are typically the less expensive dishes; the "better" dishes come with a surcharge] 

Smaller portions, "lesser" prix fixe entrees, eliminating expensive accessories — perhaps diners are paying the same amount, but getting less. That sounds like inflation to me.


courtesy of Jim Picerno

For a more generalized overview on inflation, Jim Picerno says "Don’t Write Inflation’s Obituary, Just Yet"


Where the Dollar’s Still King
October 10, 2007; Page A20

Average Meal Cost Holds Steady, Prices at High End Soar
Zagat 29th Annual New York City Restaurants Guide
PRNewswire via COMTEX, 12:01 AM ET Oct 10, 2007

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What's been said:

Discussions found on the web:
  1. sailorman commented on Oct 10

    My impression is that Pizza costs about the same, but drinks and wine cost substantially more as well as dinner in upscale restaurants. Drinks can cost 12 – 18 dollars now. I guess if you average it, there are probably 10 times the pizza places as upscale restaurants and you can do the math. I never get out of a restaurant these days at less than $100 per couple and I consider that a good price now.

  2. Jim Bergsten commented on Oct 10

    I can’t speak for NYC (though I was just there and this “news” is yet another argument for moving back).

    However out here on the “original left coast” empirical data suggests that grocery prices have increased to the point where it is more cost effective to dine out than cook in. And, of course, somewhat easier.

    Local eatery prices do not appear to have increased (at least not quickly enough to consciously notice). Perhaps this is because restaurant’s expenses do not increase all at once (rent increases are periodic, nobody gets raises anymore), and wholesale food is cheaper than retain (and, there’s always “reuse.”).

    Or, maybe they haven’t “gotten the word” (or the menus are still at the printers).

    Jim B.

  3. Jim Bergsten commented on Oct 10


    Pizza prices are a “special case” — a slice (by some sort of natural law) must always be equal to the cost of a subway fare, for you “out-of-towners” two bucks.

    Credit for this observation belongs to someone else, who in the interests of privacy must remain anonymous.

    Jim B.

  4. SINGER commented on Oct 10

    “While overall restaurant prices in NYC remain the highest in the U.S. at $39.46 per dinner, that’s only three cents higher than last year. (1/10th of 1%) This is consistent with NYC’s annual dining inflation averaging 0.97% since 9/11. *******Credit for keeping the average cost steady goes to a slew of inexpensive newcomers and to the 697 restaurants in this year’s guide that offer dinner for under $30.******* However, inflationary trends look quite different at the city’s 20 most expensive restaurants where an average meal now runs $143.06. Since 2001, dinner prices at the city’s elite have soared at an average of 11.6% per year, from $84.45 to $143.06.”

    Average costs flat overall because of the proportion of new CHEAPER restaurants added into the mix…Not because food, energy, rent has gone down…

  5. lurker commented on Oct 10

    smaller helpings at the same price equal higher prices. packaged goods companies are masters of this. Less is more (profit that is)!!!

  6. dblwyo commented on Oct 10

    We could probably do the same exercise with grocery bills as sizes are getting smaller but bills are creeping up; ditto though here in CT. Portions creeping down while bills creeping up. Clearly inflation is not dead but how not dead ?
    Going from an index of 100 to 114 is 14/5 = 2.8%/yr inflation; not good but not terrible either. Also incorrect as it compounds so what rate multiplied by itself five times yields 114 for the index ? The answer is about 2.55% – still above the Fed’s target.
    There are two other really interesting questions: what’s the trend and is anybody making any money ?
    Last first – the PPI in Aug02 was about 131.5 and this last Aug about 172.4. YoY% change was (1.4%) and 2.7% respectively but the last month was down from 4.9%. Inflation got worse but is now downtrending. But…but…but… 172.4-131.5 = 40.9. Divide by 5 and you get 8.1%/yr average (really not good but still wrong). Turns out if you do the math correctly it’s 5.5% inflation in the PPI (1.055^5).
    Forget all the messing about with numbers – PPI is running at 5.5% which is weigh above CPI – what’s going to happen with profits and earnings if this is more than a resteraunt problem ? BTW – some of this is graphed and posted at; where please forgive me I do disagree with Barry a smidge.

  7. Christopher Laudani commented on Oct 10


    Maybe those in the Zagat survey don’t eat seafood?

    I had a $28 lobster sandwich in Maine last week. As i recall, it was $18 last year.

    The survey isn’t perfect because restaurants often change their menus to respond to price changes…So, for example, they take off the $28 lobster sandwich and replace it with a $15 lobster salad. (Or they make the sandwich smaller and charge the same.)

    To the customer, it looks like prices didn’t change, but to the restaurant owner, prices went up and he had to find a replacement item or he’d lose customers.

    A better survey would be to ask owners and chefs if prices have gone up.

  8. drea commented on Oct 10

    Robert Parker’s wine ratings have been doing much the same thing in the wine industry for years now. When the scores come out, all of a sudden, I’ve seen prices double, and even triple, even though it’s the same product.

  9. Estragon commented on Oct 10

    You will never be able to quantify inflation in restaurant food generally. The value proposition is far too qualitative and subjective. Even trying does smack a bit of “lawyering”.


    BR: Why cant you quantify it? Give me a reason (beyond merely shrugging your shoulders) . . .

  10. Ross commented on Oct 10

    We went through this in the early 1970’s. You go to the store and buy an 11.5 ounce pound of coffee and a 48 ounce 5 pound bag of sugar. Hershey is the MASTER of size down price the same/size up, raise price. I expect we will eventually go to liter pricing for gasoline. “Honey, I just got 3 liters of gas for 10 American pesos!”

  11. seamus commented on Oct 10

    The small plate restaurant concept has become a lagging indicator of the wealth effect. As I recall, restaurants were falling over themselves to transform into tapas joints in the late ’90s, which basically increased the number of entrees ordered/person without reducing the price/entree. It was an obvious price increase, but in the age of the cigar bar, nobody seemed to care.

    In the early ’00s, many of these restaurants reverted to regular entree sizes, but I’ve definitely seen a return to “small plate” concepts since ’04 or so.

  12. Justin commented on Oct 10

    Since I don’t eat out too often, except when moma lets me! (and that’s very expensive…given external cost, etc…). I read the article, “Don’t Write Inflations Obituary,” and there is no doubt that other economies are injecting tremendous amounts of cash at there M3 levels…China, Russia, India, Brazil, et. al….

  13. me commented on Oct 10

    “My impression is that Pizza costs about the same,

    Not in Atlanta. Pizza Hut raised prices 15%. I decided to switch until I found out Dominoes and Papa Johns raised prices the same.

  14. David Merkel commented on Oct 10

    I guess we have to hedonically adjust restaurant prices to get the right answer here. Impossible of course, but the key to hedonic adjustment when done properly is that one has the possibility of buying the prior good and the current good, so that a true comparison and choice can be made.

    Unfortunately in hedonics, it seems that there is no choice and a technical comparison gets made and applied to the price, which is bogus.

  15. Toro commented on Oct 10

    Food doesn’t matter in inflation statistics.

    Don’t you guys know that?


  16. Bullion commented on Oct 10

    According to an estimate by the Community Service Society, 65% of New York City families living below the federal poverty line are paying more than half of their income toward rent.

  17. Norman commented on Oct 10

    I agree with ESTRAGON that, “You will never be able to quantify inflation in restaurant food generally. The value proposition is far too qualitative and subjective.”

    There are just too many variables going from A-W to make analysis possible, right Barry?

  18. MJ Hollingum commented on Oct 10

    I thought restaurants were like government bonds, the higher the price the lower the yield (food) and vice versa.

  19. a guy called john commented on Oct 10


    a better way to promote your blog would be to provide meaningful content in the comments. i have read a couple of blogs on a semi-regular basis (i.e. nothing like the amount i read barry) because the authors weighed in w/ an interesting p.o.v.

  20. cm commented on Oct 11

    Off topic but marginally related — milk again up a dime this week …

  21. Andrew Horowitz commented on Oct 12


    You ain’t seen nothing until you eat and or drink (if you have money for both) in Moscow. Spent time there this summer and was aghast at the prices. Coffee=$10US, Breakfast $25US, Dinner=$100US. — PER PERSON!!!

    But cigarettes are $1.50 per pack and Vodka is $4 per 5th… Maybe that is why the average life expectancy for Russian men is 56 (so said the cab driver – $50 for 20 minute rise)



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