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Restaurants manage to minimize the impact of rising food and labor costs

 

Restaurant vs. home-made food

Everything is getting more expensive every day!

Is that how you feel about today’s inflation? Consumer prices at grocery stores, for example, had increased 13.1% in July 2022 from a year before.  

 

Higher food prices and increasing wages pressure restaurant operations

 

Food and beverages are the core product that a restaurant sells. Food and labor make up a restaurant's two highest variable costs. Besides higher food prices, labor costs in the second quarter also surged 5.1% from last year, recording the largest rise since 2001. Restaurants are under high pressure to increase meal prices. 

 

Restaurants manage to raise the menu prices at a lower rate 

 

Consumer prices at restaurants in July 2022 only increased 7.6%, resulting in the most significant inflationary gap between grocery stores and restaurants since the 1970s. By comparison, restaurant meals have become a “bargain” now. More people go to fast food restaurants for cheap bites instead of cooking at home. Taco Bells, which sells burritos and tacos for $1, had seen an 8% increase in-store sales in the second quarter of 2022.  

 

How do restaurants make eating out a better value than cooking at home?  

 

While restaurants cannot control food costs, offering meals in smaller portions can be a solution. Introducing/promoting items with higher profit margins (e.g., chicken sandwiches) or substituting a higher-priced item with an alternative (e.g., using green beans instead of asparagus) can also help. 

 

Meanwhile, robots are finding their way to restaurants. Introducing automatic services to front- and back-of-the-house operations can help restaurants cut labor costs without dealing with the HR challenges like labor shortage, “Great Resignation,” and soaring wages.  

 

It is challenging for restaurants to avoid a price hike, but so far, the industry is doing an excellent job in keeping it at a reasonable level. Now, it is time for restaurants to communicate their value to customers. 

 

Do you think the restaurant industry is doing an excellent job in keeping the meal prices down? What suggestions will you make for restaurants to conquer the rising food and labor costs? 

 

References

 

Haddon, H. (2022, August 15). Restaurant meals become a relative bargain as grocery prices soar. The Wall Street Journal. Available via https://www.wsj.com/articles/restaurant-meals-become-a-relative-bargain-as-grocery-prices-soar-11660561200

 

Haddon, H. & Thomas, P. (2022, August 1). The popular chicken sandwich gets a redo at Panera Bread, Popeyes. The Wall Street Journal. Available via https://www.wsj.com/articles/chicken-sandwiches-remain-the-star-of-inflation-era-menu-11659355384

 

Mutikani, L. (2022, July 29). Tight U.S. labor market keeps upward pressure on wages; inflation heats up. The Reuters. Available via https://www.reuters.com/markets/us/us-labor-costs-increase-strongly-second-quarter-2022-07-29/

 

Wasserman T. (2022, August 2). Robot cooks are rapidly making their way into restaurant kitchens. CNBC News. Available via https://www.cnbc.com/2022/08/02/robot-cooks-are-rapidly-making-their-way-into-restaurant-kitchens.html

 

Note: This article was also published in The Hospitality News MagazineThe picture was downloaded from Buzzfeed.com

Comments

  1. prices on the menu have been lowered, resulting in a reduction in the prices charged by the restaurant compared to the costs charged by grocery shops that offer more excellent processing for their items. This makes it simpler for customers to visit the restaurants.

    Is the restaurant industry doing an excellent job of keeping meal prices down? What suggestions will you make for restaurants to conquer the rising food and labor costs?

    Yes, today's restaurants are contributing significantly to the decrease in the cost of food by making it more straightforward for consumers to get a meal at an affordable price. This is one of how they are lowering the cost of food. I recommend that grocery shops provide restaurants with discounted access to the food goods they sell, making it possible for the restaurants to serve meals timelily.

    Runze Gu HRT 3500 Section 2

    ReplyDelete
  2. Inflation has become nearly a worldwide issue. And it has cost us a lot in the hospitality industry. Restaurants aren't able to control food cost so the alternative is offering meals in smaller portions. Restaurants are under a lot of pressure to increase meal prices because food and beverages are the core product of an overall restaurant. And due to this more people are starting to go to fast food restaurants for something cheap rather than making something at home. I do think the restaurant industry is doing a good job in keeping the prices down but for how long will that stay consistent? Inflation only continues to get worse.
    section 2

    ReplyDelete
  3. HRT 3500 Section 2
    Do you think the restaurant industry is doing an excellent job in keeping the meal prices down? What suggestions will you make for restaurants to conquer the rising food and labor costs?

    Inflation has affected restaurants as food prices increase and labor costs increase. I've seen this first-hand at the restaurant I work at. It's a semi-upscale restaurant with expensive food items. Each dish is made up of high-quality food items and is reasonably big in portion size. But because of this, the menu item prices have increased in the past year and often ward off people. They tried resorting to lower-quality but cheap alternatives but many customers complained. Some restaurants offer smaller portion sizes to combat the effects inflation brought. If the restaurant I worked at decided to off everything on the menu in smaller portion sizes, then they might be more successful in bringing the food menu prices down.

    ReplyDelete

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