Is Cooking at Home Still a Bargain?

According to Daily Finance, the price of groceries rose between 4.25% and 4.75% in 2011. The cost of eating out rose only half that amount — 2 to 2.5%. The article states that high unemployment and low wages continue to lead more people to eat at home. Increased demand for groceries last year led to higher-than-normal price increases (typically 2.9% a year).

Given these numbers, it’s a good time to ask: Is eating at home still cheaper?

Some restaurants such as Olive Garden, Starbucks and Taco Bell, are adding menu options to appeal to the price-conscious and drive business during slow times of day. Olive Garden is revamping its menu to offer lower-priced options, renovating some of its restaurants, and changing its ad campaign all in an attempt to refresh its brand. Starbucks is adding alcohol at some locations while Taco Bell is experimenting with breakfast. All this at a time when some grocery staples, such as milk and beef, rose 9.2% and 11.5%, respectively, in 2011.

Restaurants are also experiencing increasing food costs, but are often forced to absorb the increase or look elsewhere to cut costs:

If restaurants pass along all their cost increases to consumers, it will make them less competitive.

Restaurants are in an interesting bind. On one side they’re facing higher food costs, and at the same time they’re facing consumers who increasingly expect a deal. I don’t envy restaurant managers who have to make some tough decisions this year about how to cut costs while still offering a quality product.

Back on the grocery side, what can you do to save at the store? Recently I wrote about 7 ways to spend less on groceries, and followed it up with 3 more ways to save.  With some forethought and a little planning, it’s possible to blunt the impact of higher prices on your wallet. One of my suggestions was to give store brands a try. Recently at the store, I bought three different generic items and saved 60% versus the national brands. This tip alone can produce substantial savings.

Even with higher grocery prices, eating at home remains a bargain. Last time I ate at Olive Garden, the cheapest entrée on the menu was about $12. After tax and tip it was $15. I could instead take that $15 and buy enough food for two full dinners with leftovers for my wife and I at the grocery store. When comparing the number of meals you get for $15, it’s Restaurant: 1, Grocery Store: 6. Not even close.

The USDA predicts that grocery prices will increase 2.5% to 3.5% in 2012. While this is much closer to the average, prices are still headed up. What this means is that you’ll have to be more creative and find ways to save that work for you.

There are, of course, reasons you might still choose to eat out. Maybe you want some time to talk with your family without worrying about putting dinner on the table, or maybe you just want out of the house. But in pure dollars and cents, eating at home still beats going out.

Photo by ReneS

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