Fast-food prices have climbed 55.4 percent since January 2018 — and the industry's biggest problem still hasn't moved. That's the core finding of a new report from consumer-data firm Numerator, published earlier this week. Ordinary household purchases rose 34.8 percent over the same stretch, meaning quick-service menus have outpaced everyday inflation by more than 20 percentage points in under seven years.

The mechanism, according to two economists who spoke with Inc., is labor — and it explains why restaurants can't simply stop raising prices even when customers flinch.

Why do restaurant prices rise faster than groceries?

Joseph Balagtas, a professor of agricultural economics at Purdue University and director of its Center for Food Demand Analysis and Sustainability, points to USDA data showing that labor accounts for 59 percent of what consumers pay for food in restaurants, versus 47 percent for groceries. That gap is the whole story. When wages rise, restaurant menus feel it more.

"In restaurants we're paying for food ingredients and for people to prepare and serve the meal," Balagtas told Inc. "So as a tight labor market pushes wages up, it shows up more in restaurant prices than in groceries."

The pressure isn't hypothetical. Chad Moutray, chief economist at the National Restaurant Association, said labor costs are up 42 percent since the pandemic. Profit margins, in his words, remain "exceptionally tight." Sales have held up — but traffic growth has been challenging. Chains are earning more per visit while struggling to win more visits.

What does the broader price picture look like?

The Numerator report also tracked everyday prices beyond the drive-thru:

• Everyday household prices rose 0.6 percent in October, after a 0.7 percent climb in September.
• On an annual basis, prices were up 2.7 percent in the latest reading, an acceleration from 2.1 percent in September.

Inflation-weary consumers, as the report's framing suggests, may be nearing their spending limit. That's the tension the numbers capture: costs keep pushing menus upward while wallets stop stretching.

Can restaurants just pass costs on forever?

Not entirely, and the economists were careful about how the pass-through actually works. Balagtas rejected the simple framing of rising costs versus chains charging whatever customers tolerate. "Both matter," he said. Costs give restaurants a reason to raise prices; demand and competition decide how much of those costs they can actually shift onto the bill.

Here's the twist that protects most chains: because nearly every operator faces the same wage and input pressures, a restaurant that raises prices is less likely to lose customers to a rival that doesn't. The whole sector moves together. That symmetry, Balagtas argued, helps explain Moutray's observation that sales have held even as traffic growth stalled.

But there's a ceiling, and Moutray named it plainly: "Many restaurants feel they can't fully pass higher costs on to consumers who are already stretched financially."

Who gets hit hardest?

Lower-income households, Balagtas said, because they spend a bigger share of their money on food. Broad-based price increases hit them first and hardest.

Yet even cutting back isn't simple. Food demand is famously sticky — people keep buying it when prices rise across the board, because everyone in the market is charging more. And the substitution math is harsher than it looks.

"If you want to eat one less fast food meal a week, do you have the time and inclination to prepare an extra meal at home?" Balagtas asked. Time is a cost too. Cooking a replacement meal isn't free, and for many households it isn't realistic.

What can chains do about it?

Balagtas sees an off-ramp short of outright price cuts: chains may find ways to keep customers coming, such as offering expanded value meals or other discounts. Whether higher prices eventually drive diners away, he suggested, will depend on two things — who is paying them, and what chains give in return.

For now, the numbers say the model still works: menus up 55.4 percent since 2018, labor costs up 42 percent since the pandemic, sales holding, traffic stalling. The question hanging over 2025 is which of those lines breaks first.