Inflation is affecting everyone in the restaurant business and there’s nothing you can do about it, right? Wrong.
We reached out to our circle of restaurateurs and business owners to ask them the big questions: how are restaurants operating on a razor-edge profit margin (5–-15%) supposed to cope with the latest challenge of inflation?
This article covers:
- What inflation means for your bottom line
- Why inflation isn’t going anywhere anytime soon
- Practical advice for tackling inflation without raising prices and alienating customers
Ready to start reclaiming your revenue? Keep reading.
Inflation Is On The Rise And Showing No Signs Of Stopping
Inflation is affecting everything from food and cutlery to rent and gas. Some categories are doing better than others—but everything is more expensive than it was a year ago.
Let’s take a closer look.
|Food||Predicted Inflation Increase During 2022||Notes|
|Seafood||8.5% to 9.5%||Seafood is 12.2% higher in cost in May 2022 than it was in May 2021.|
|Poultry (wholesale)||20% to 23%||HPAI virus has caused additional issues in pricing here.|
|Dairy (wholesale)||14% to 19%||The USDA states that there has been a rapid increase in consumption of dairy products recently.|
|Wheat (wholesale)||23% to 26%||The crisis in Ukraine accounts for a large portion of this increase.|
Source: USDA ERS
A healthy economy is said to need a 2 to 2.5% inflation—far below what we’re currently seeing. There are several reasons for the current high rates:
- COVID-19 supply chain crisis. With countries easing out of lockdown, demand for goods and services is evolving rapidly and soaring to pre-pandemic levels in many sectors. However, it takes time for the global market to re-adapt and keep up, creating an out-of-sync-ness that’s driving prices upward.
- The conflict in Ukraine. A large amount of the world’s wheat is stranded in Ukrainian ports (Ukraine being one of the world’s largest producers of wheat). This, coupled with sanctions on Russia, has caused food and fuel prices to rise around the globe.
“The acceleration in food inflation reflects the fact that retailers can no longer absorb the full extent of increased supply-chain costs now hitting the industry.” —Mike Watkins, Head Of Retail & Insight for NielsenIQ, Source: The Guardian
What does that mean for restaurants? The short answer: higher costs.
Two Restaurant Industry Experts Weigh In On Inflation—And What Restaurants Can Do About It
We spoke to two reps from Ben E. Keith (a food distributor company) to get the inside scoop on what’s going on with inflation. Here’s what Kyle had to say:
“We’re seeing an 8–9% increase in what we’re shipping out to the customer. Food costs are probably still going to rise. Most prices will not go down. We’re advising our customers to find the correct pricing, then add a small percentage to it to give you some wiggle room for increasing costs over the next several months.”
The second rep, Sam, said most restaurants that Ben E. Keith supplies are combating inflation by raising prices and passing the additional cost to the customer. With the rising price of shipping and labor in food factories, that’s understandable.
Sam explained that some food categories require greater flexibility from restaurant business owners than others: “A lot of the stuff coming to us is significantly more expensive than what it was a year ago. Take crab—it’s probably double what it was two years ago. Thirty pounds is $560 now; it used to be $240 to $250. Anyone with crab on the menu is going to have to make serious adjustments.”
Next up: More practical tips for offsetting inflation
Three Top Tips For Surviving The Inflation Crisis
Inflation isn’t going away anytime soon. But that doesn’t mean you can’t do anything about it. At HungerRush, we’ve been working alongside restaurants to navigate this crisis. Here are a few of our ideas for how you can handle inflation:
- Cut Down On Wasted Food. 10% of food bought by restaurants ends up as waste. That means lower profit margins on the food you actually sell. You can tackle waste by using a real-time inventory management system to make purchasing decisions. If your customer orders directly connect to your POS and inventory management systems, there will be a lot less guesswork and waste. You could also try selling excess food on reclamation apps like Too Good To Go or Food Rescue US.
- Simplify, Simplify, Simplify. If your crab sandwich is breaking the bank, try replacing it with a cheaper substitute—a chicken sandwich, for example. It’s a flexible protein that’s cheaper than crab, plus it can be bought in bulk and frozen. Another option would be to reduce portion sizes and, thus, increase your margins.
- Raise Your Prices—Carefully. Inflation is real and you have a business to run. Customers are in the same boat—on some level, they understand. And if you’re feeling bad, don’t. You’re in good company, with 47% of small business owners raising prices this year, according to a survey by CNBC.
Learn more: How to Reduce Restaurant Food Waste And Increase Margins
Hungry For More Inflation-Busting Tips?
The tactics we outlined in this article are just the tip of the iceberg. We created a downloadable eBook chock-full of practical advice on defeating the trifecta of inflation, labor shortage, and supply chain disruption.
Tired of just scraping by? Would you rather concentrate on providing a great dining experience to your customers? HungerRush is here to help. Download the Trifecta Toolkit and see how you can cut down on inflation costs today.
Get the Trifecta Toolkit and get a handle on inflation right now.