A Taste of Restaurant Inflation Pressures

Calcbench was feeling a bit peckish this week for insights into the macro-economic environment, so how better to pass the time then sifting through the earnings releases from restaurants to see what they had to say about inflation? 

Various restaurant chains offer inflation forecasts as part of their earnings guidance. A good example of this is Darden Restaurants ($DRI). Last summer, at the end of its fiscal 2025, the company had forecast inflation for its upcoming fiscal year at 2.5 to 3 percent. By the end of its fiscal Q1 2026 in September, Darden nudged the forecast upward to 3 to 3.5 percent.

Darden filed its latest earnings release this week, for its fiscal Q3 2026. It now forecasts inflation at 3.5 percent. 

That led us to look for other disclosures at other restaurants. Sure enough, we found them.

Texas Roadhouse ($TXRH) included inflation estimates in its 2025 full-year earnings release filed on Feb. 19. The company predicts wage and labor inflation costs of 3 to 4 percent, and commodity inflation costs at an eye-popping 7 percent!

Analysts can take those numbers and do some preliminary modeling. Figure 1, below, shows Texas Roadhouse’s costs as reported on the 2025 income statement. Food and beverage costs were $2.05 billion, labor costs $1.94 billion.

If the company’s inflation forecasts prove true, that would imply 2026 food and beverage costs of $2.19 billion and labor costs of $2.01 billion — a total increase of $211.5 million. That amount would shave 44 percent off Texas Roadhouse’s operating income, which was $474.7 million for the year.

Of course Texas Roadhouse’s actual 2026 performance will hinge on other factors too, but if those inflation predictions prove true then there’s no denying they will be a significant squeeze on earnings that the company will have to address somehow: higher prices, efficiency programs, or some mix of the two — and that was all before war in Iran sent fuel and fertilizer costs soaring. Model accordingly.

One could run the same sort of analysis on Bloomin Brands ($BLMN). In its 2025 earnings release from Feb. 25, the parent company of Outback Steakhouse and other brands said it expects commodity inflation of 4.5 to 5.5 percent and labor inflation of 3 to 3.5 percent in the coming year. 

Figure 2, below, shows that Bloomin had $1.18 billion food costs and $1.24 billion in labor costs for 2025. Adjust those numbers upward according to Bloomin’s inflation estimates, and you arrive at an increase of $99.1 million for 2026, which is more than twice the company’s 2025 operating income of $37.1 million. So again, even if these inflation estimates are only somewhat accurate, that’s a big threat to earnings that Bloomin will have to address somehow.

Alas, not many other restaurant businesses do offer inflation estimates in their guidance, but perhaps that’s important to know too. From the few examples we found, inflation is clearly a potent threat to earnings. Just because other restaurant businesses don’t provide inflation estimates, that doesn’t make the threat go away.

Food for thought as you prepare for Q1 2026 earnings and questions you want to ask the CFO on that next earnings call.