The Mexican Supply Chain Monopoly
Ever wonder why that perfect, green avocado on your toast costs more than a basic breakfast sandwich? The answer starts thousands of miles away in Mexico’s avocado groves. About 90 percent of the avocados coming into the U.S. are imported from Mexico, creating what economists call a supply chain bottleneck. Mexico is the biggest producer of avocados in the world and exported $3.3 billion worth of avocados in 2023. This single-country dominance means any disruption—from weather to trade policies—hits American breakfast tables hard. It “won’t be possible for domestic producers to pick up the slack because avocados are a perennial tree crop, so it would take several years to ramp up domestic production”. Unlike tomatoes or lettuce that grow in a season, avocado trees need years to mature. Think of it like having one friend who always brings the best snacks to parties—if they don’t show up, everyone goes hungry.
The $2.00 Threshold Is Coming
Experts predict that the average price of avocados will reach approximately $2.00 by 2025. That’s double what many consumers paid just a few years ago, and it’s not just inflation talking. In the U.S., prices may average around $2.00 per avocado, while in Europe, where avocados are often sold at a premium, prices could reach $2.50 or more. For restaurant owners already juggling tight margins, this price jump isn’t just about one ingredient—it’s about recalculating entire menu costs. Prices could rise by 10% to 15% this year compared to the second quarter of 2023, when Mission Produce’s avocados were priced at $1.30 per pound. Now the new price point may be $1.43 to $1.50 a pound. When your star breakfast ingredient doubles in price, that $12 avocado toast suddenly looks like a bargain.
Restaurant Markup Mathematics
Here’s where the real sticker shock begins: restaurants don’t just add a dollar to your avocado’s wholesale price and call it a day. In general, a food restaurant’s price is about three times its wholesale cost – a 300 percent markup. But brunch items often carry even higher margins because they’re perceived as premium offerings. The industry standard for food costs is 28% to 32% of a menu price, according to research by Baker Tilly. That means the markup should be at least 200%, but for a daily special it could be much higher. So when restaurants pay $2 for that perfect avocado, they’re not charging you $4—they’re charging you $6 to $8 before adding bread, labor, and overhead costs. It’s like buying a concert ticket: you’re not just paying for the music, you’re paying for the venue, the sound system, and the experience.
Brunch: The Golden Hour of Restaurant Economics
Restaurants love brunch, and there’s a simple economic reason why. Foods like Belgian waffles, pancakes and French toast require little prep time and have low ingredient costs. Avocado toast fits this profitable profile perfectly—minimal cooking, maximum perceived value. A brunch combo, including two eggs, two slices of bacon and two buttermilk pancakes, for example, costs around $10 at a family-style restaurant like The Cheesecake Factory. An order of thick-cut French toast costs about $12. Restaurants can charge premium prices for what feels like a special occasion meal, even though the preparation costs remain relatively low. It’s the difference between selling a hamburger at lunch and calling the same beef a “gourmet patty” at dinner—presentation and timing change everything.
Labor Costs Are Squeezing Every Plate
Your expensive avocado toast isn’t just about the avocado—it’s about the person who makes it. Food inflation now dominates restaurant concerns, with 52% ranking it as their primary challenge and 86% including it in their top three. Labor costs closely follow as the second most pressing issue, ranked first by 31% of operators and in the top three for 83% of restaurants. Many states have raised minimum wages significantly, with some reaching $20 per hour. Beginning April 1, 2024, food chains that have at least 60 locations nationwide will be required to raise their minimum wage for restaurant employees to $20 per hour. While the price of groceries rose by 1.3%, the cost of food away from home (restaurants) increased by 5.2%. When labor costs double, every menu item needs to generate more revenue to keep the restaurant profitable. That avocado toast isn’t just covering the cost of ingredients—it’s helping pay the wages of everyone from the prep cook to the server.
The “Prime Cost” Reality
Restaurant owners live by a simple but brutal rule: Most restaurants aim to keep their prime cost — the combined cost of food and labor — under 55 percent to 65 percent of total sales. Prime cost is like a restaurant’s blood pressure—if it gets too high, the business is in serious trouble. According to Chron, which quotes the White-Hutchinson Leisure & Learning Group’s CEO, a restaurant should aim to keep its labor and food costs below 60 percent of the revenue generated, with labor costs ideally staying under 30 percent of the revenue. When avocado prices jump and wages increase simultaneously, that $15 avocado toast isn’t gouging—it’s survival math. A typical independent restaurant might see a profit equal to about 5 percent of total sales. Think of restaurants as operating on airline profit margins while serving airplane food quality expectations—except the food actually has to be good.
The Tariff Time Bomb
Political decisions in Washington directly impact your weekend brunch bill. Trump on Monday announced plans to impose a 25 percent tariff on all goods from Canada and Mexico as part of an effort to crack down on the flow of illegal drugs and migrants into the country. Since nearly all American avocados come from Mexico, this policy could dramatically increase prices. Still, consumers might expect a $3 serving of guacamole to rise to $3.25 or so to reflect the higher cost of the ingredients, others of which are likely subject to their own tariffs. First, a 25% tariff on imports from Mexico would lead to higher avocado prices at the grocery store. Trade wars aren’t abstract economic concepts—they show up as real dollars on restaurant receipts. When politicians talk tough on trade, your brunch budget pays the price.
Food Inflation Outpaces Everything Else
While your salary might be staying flat, food costs are climbing like a mountain hiker on caffeine. Overall food prices are predicted to increase by 2.2%, with food purchased for home consumption rising by 1.3%. However, food-away-from-home, which includes restaurant meals, is expected to see a slightly higher increase of 3.6%. Food price growth continued to slow in 2024, rising by 2.3 percent, as those factors combined with cooling labor pressures, lower energy prices, and changes in consumer demand. Food-at-home prices increased by 1.2 percent in 2024, lower than their historical average pace of growth, and food-away-from-home prices rose by 4.1 percent, slightly outpacing their historical average. Restaurant prices are rising faster than grocery store prices, making that home-cooked breakfast look increasingly attractive. Despite the sizable declines during the last 2 months, average wholesale food prices remained 4.7% above their year-ago level. While that was down from the robust 9.8% increase during the 12 months ending in February, this extended period of elevated food costs continues to pressure restaurant profitability.
Overhead Costs Hidden in Every Bite
That slice of avocado toast carries the weight of an entire restaurant operation on its shoulders. Taxes, rent, insurance, utilities and other overhead costs eat up the remainder of sales. Every menu item needs to contribute to paying for everything from the kitchen equipment to the bathroom cleaning supplies. It’s impossible to break even or grow a restaurant without marking up your prices. The total menu item price needs to cover everything, including: … A general rule of thumb is that items have at least a 300% markup or three times the wholesale price. To make up for these prime costs, most restaurants add a “markup” to their menu prices. The size of this markup varies depending on the restaurant concept, among other factors. It’s typically around 200-300% of the total food costs. Your avocado toast isn’t just funding ingredients—it’s keeping the lights on, the music playing, and the coffee flowing. Think of it as paying rent for a temporary seat in someone else’s dining room, complete with service and ambiance.
Consumer Behavior Shifts The Game
Diners are becoming more price-sensitive, but they’re still willing to pay for experiences. More and more people are cutting back on dining out, with 55% of U.S. adults in Q3 of 2024 reporting they’re spending less on eating out, up from 52% earlier in the year. However, Despite higher prices, demand over the last 52 weeks is one percent higher than the 52-week period from a year ago. Over the last four weeks, demand is running at a three percent increase over the same four weeks last year. This creates a fascinating dynamic: fewer people are dining out, but those who do are ordering more expensive items. A CivicScience study from June 2024 found that 57% of consumers were dining in more often, up from 51% in 2019, likely as a way to save money. Restaurants are adapting by focusing on customers willing to pay premium prices for quality experiences, making that $18 avocado toast a strategic business decision rather than highway robbery.
What would you have guessed—that your weekend brunch splurge was really subsidizing an entire global supply chain, trade policy decisions, and the rising cost of keeping restaurants alive?
