Declining Food Prices May Soon Bring Relief to Food Service Franchises

On Thursday, Bloomberg published a story by agricultural reporter Megan Durisin on the global food price index, which has gradually declined since it skyrocketed earlier this year. While the index is still high, the downward trend suggests financial help is on the way for food service businesses.

The food cost index, released by the UN’s Food and Agriculture Organization, measures the monthly changes in the cost of cereals, oilseeds, dairy, meat and sugar. In early summer, the FAO detailed how food prices in May were “4.8 percent higher than in April and 39.7 percent higher than in May 2020.” That downward trend is expected to continue as the northern hemisphere approaches a full harvesting season this fall.

Earlier this year, the spike in worldwide food costs presented challenges for restaurants, restaurant suppliers and grocery chains alike. The declining index will give those businesses the chance to revert back to some operations that were once standard, and that could do wonders for franchises that have struggled to adapt to a pandemic.

The supply chain crisis may offset some of that help for consumers and franchises, however. For products like rice, the world is seeing a “trade slowdown, partially due to the spike in freight and shipping costs around the world,” Durisin said. 

Some companies may be less willing to purchase food with expensive shipping, so the current prices of global trade have forced many food suppliers to sit on an abundant supply and lower their food prices as a hopeful purchasing incentive. Lower food costs will at least help mitigate some of the additional shipping expenses.

Locally sourced foods could have extreme benefits for franchises to navigate a challenging supply chain, as local shipping expenses are far lower.

But a local supply chain may not be feasible for many brands. National food service franchises strive for consistency across each unit, and sourcing local foods may create inconsistencies.

Declining food prices will of course benefit consumers as well. Shipping issues aside, the trend suggests the global food trade may be recovering from pandemic-related shutdowns. Food service franchisees could see a big spike in productivity once lower food prices are matched with an efficient supply service.