Inflation in the restaurant business feels like it could be the knockout punch after the one-two combination that started in 2020. First the restaurant industry was hit with business restrictions and then the Great Resignation and now inflation is affecting your bottom line. The good news is you can do something about it today.
What exactly is inflation? Well, dictionary.com defines inflation as the general rise in prices and fall in the purchasing value of money. The gas station is a great example. The cost of gas is so high that people have to start making decisions about how to spend their money in order to afford gas. They will also limit their gas usage.
Gas costs go up for manufacturers, so they charge distributors more, and they pay more for their goods and their gas, and then you’re paying more for the products you want and not that’s your customers willing to pay for yours. food. At some point during inflation, the cost of the food and the experience of eating your restaurant food exceeds the value.
What’s a restaurant owner to do? Well, this is what I teach my members every day.
1. Create a budget.
That’s your proactive plan for success. That means everything on your budget is on the table for consideration. You do whatever it takes to get your prime cost to 55% or lower (total cost of goods sold + total labor cost). Your budget is your plan for how you will make changes to overcome these challenges.
Attacking your menu reduces the number of items you are selling to create efficiencies in the kitchen. This can be reducing prep so you can reduce the number of cooks you need on the line at one time. One way to combat inflationary pressure is to adjust your menu to lower the cost of labor. Recipe costing cards are essential because you need to know what each item you sell costs so you know what you can sell. Then you can use your POS mix, what your customers buy, your actual recipe costs, and what you sell it and calculate what your ideal food costs should be based on what your customers actually buy. This also gives you the ability to re-engineer your menu and reduce your food costs, often 3-7 points if you never engineered a menu in the first place. By knowing the cost of the products you sell, you can make changes that shift customers to other, more profitable items.
No matter what, you have to be ready to attack anything on your menu. I have members whose best sellers have gradually dropped because the labor to prepare and make them is so high that it outweighs the profits on other items.
3. Proactively budget for labor.
With a budget, you can tell what your labor costs should be by period, whether you’re on a 13-period accounting cycle or monthly. What is your labor cost for that single period? While doing that, I teach a system called the Restaurant Payroll Guardian, which tells managers how many hours they have and how many dollars they have available to schedule next week on budget.
The idea of the budget is to change things rather than be reactive. The most common way to manage labor I see is to bring people in and cross your fingers that you are busy enough to pay the hours. When you’re not busy enough, you send them home before it’s too late. I teach restaurant owners how to proactively schedule on a budget knowing that you have a set number of hours in the kitchen and that’s it.
While this is by no means an exhaustive list, these are the things I recommend to members of my restaurant coaching group, and I want you to do and start them today.
How is the restaurant industry doing?
The restaurant industry was hit first and worst when COVID-19 shut down the economy. According to the National Restaurant Association, businesses laid off or laid off 8 million hospitality workers and lost $280 billion in sales in the first 13 months of the pandemic.
What is the safest way to eat out during the COVID-19 pandemic? Picking up food while wearing a mask or having it delivered to your door is still a safer way to enjoy a meal that wasn’t cooked at home. The CDC describes drive-thru, delivery, take-out, and curbside pick-up options as the lowest-risk way to eat out.
What are some of the ways that food businesses remain safe from COVID-19?
Food businesses must ensure that adequate sanitation facilities are provided and ensure that food workers wash their hands thoroughly and frequently. Soap and water are sufficient for hand washing.
What precautions should be taken for food safety during the COVID-19 outbreak?
You should always handle and prepare food safely, including keeping raw meat separate from other foods, refrigerating perishable foods, and cooking meat to the right temperature to kill harmful germs. See the CDC’s Food Safety site for more information.
What can I do to prevent COVID-19 during grocery shopping?
⢠Clean your hands with sanitizer before entering the store.⢠Cover a cough or sneeze in your bent elbow or a bent tissue. this distance, wear a mask (many stores now require a mask).⢠When you get home, wash your hands well and after handling and storing your purchased products.
The virus is not transmitted through foods, it is not a foodborne pathogen like the viruses and bacteria that cause what we often call ‘food poisoning’. This means that uncooked or cold foods, such as salad or sushi, pose no additional risk of exposure to the coronavirus.
Can COVID-19 spread through food?
The virus that causes COVID-19 is a virus that causes respiratory illness. Viruses such as norovirus and hepatitis A that make people sick through contaminated food usually cause gastrointestinal or stomach ailments. There is currently no evidence that food, food containers or food packaging are associated with the transmission of COVID-19.
What are the risks of food from takeout or drive-thru food?
There is currently no sign of an increase in take-out illnesses or drive-thru meals.
What does inflation mean for restaurants?
Being inside is a tough tie. For those in the restaurant industry, inflation means trying to balance rising overhead costs with rising menu prices – doing just enough to break even, but not enough to scare off your customers.
How does inflation affect fast food? Higher prices, faster portions and apps – how fast food chains are changing value markets. Fast food menus are shrinking and becoming more expensive amid the current inflationary environment.
Is inflation good for restaurants?
Inflation is a challenge for restaurants that have survived the pandemic Higher costs of food, labor, rent, gasoline and cooking gas have made it more difficult for casual eateries to buy, cook and deliver meals. And they are limited in what they can pass on to customers.
How is inflation affecting restaurants?
How Does Inflation Affect Restaurants? Many restaurants have had to raise menu prices to more directly align with the increased costs of gas, labor, food, supplies and other elements critical to maintaining a food service establishment.
Does inflation affect food prices?
In 2020, food prices at home increased by 3.5 percent and food prices away from home by 3.4 percent. This convergence was mainly driven by the increase in food prices at home, while food price inflation away from home remained within 0.3 percentage points of the 2019 inflation rate.
How is inflation affecting restaurants?
How Does Inflation Affect Restaurants? Many restaurants have had to raise menu prices to more directly align with the increased costs of gas, labor, food, supplies and other elements critical to maintaining a food service establishment.
Are people eating out less because of inflation?
More than 80% of US consumers said they are eating out less often as a result of inflation, according to a Morning Consult survey. And about three quarters said they are going out to bars less often.
Is eating out cheaper than groceries?
With consumer prices at 40-year highs, savvy consumers know they need to put more work into their shopping if they want to save money. But when it comes to food, you’ll usually save money â and enjoy better nutrition – eating at home than eating out. Copyright 2022 Nexstar Media Inc.
Are restaurants suffering from inflation?
Food cost inflation has hit restaurants much harder than they thought it would, which is saying something for an industry that entered 2022 expecting the cost of goods sold to rise by double digits at least a tall individual. But industry executives indicated on earnings calls last week that things were looking up.
Why is inflation bad for restaurants?
Inflation is a challenge for restaurants that have survived the pandemic Higher costs of food, labor, rent, gasoline and cooking gas have made it more difficult for casual eateries to buy, cook and deliver meals. And they are limited in what they can pass on to customers.
How does inflation affect restaurants? How Does Inflation Affect Restaurants? Many restaurants have had to raise menu prices to more directly align with the increased costs of gas, labor, food, supplies and other elements critical to maintaining a food service establishment.
Does inflation affect food prices?
In 2020, food prices at home increased by 3.5 percent and food prices away from home by 3.4 percent. This convergence was mainly driven by the increase in food prices at home, while food price inflation away from home remained within 0.3 percentage points of the 2019 inflation rate.
Is food affected by inflation?
The prices of almost all grocery items have risen sharply over the past year. The cost of eggs has increased by 38%, while prices for other goods are also jumping: Flour is up 22.7%, chicken 17.6%, milk 15.6%, ground beef 9.7% and bacon 9.2%. Fruit and vegetables were 9.3% more expensive.
What are 4 things that affect food prices?
In the short term, food prices are affected by many factors, making them volatile. These factors include supply and demand, weather, disease outbreaks, war, and natural disasters.
Are restaurants suffering from inflation?
Food cost inflation has hit restaurants much harder than they thought it would, which is saying something for an industry that entered 2022 expecting the cost of goods sold to rise by double digits at least a tall individual. But industry executives indicated on earnings calls last week that things were looking up.
Why are restaurants increasing their prices?
Due to inflationary increases, restaurants are raising their prices to keep up with rising food costs, ranging from a dollar to two. Menu prices have risen by 7.4% over the past year. Customers are seeing restaurant menu prices rise this summer season amid inflationary challenges.
Is the restaurant industry growing or declining?
The restaurant industry in the United States has seen healthy growth over the past few decades, despite the challenges caused by the coronavirus (COVID-19) pandemic.
How does inflation affect hotel industry?
“There is not much recent data on the statistical relationship between inflation and hotel performance,” Meliker said. “But the data we have says that inflation is relatively positive for hotel pricing power and ADR [average daily rate] growth. The data also suggests that inflation is generally positive for hotel cap rates.”
How does inflation affect tourism? Inflation in tourist destination areas is also caused by land values, and tourism creates additional demand for land. The extent to which inflationary price increases are compensated for local residents through economic benefits such as increased employment and income is uncertain.
How does a high level of inflation affect the hospitality and tourism industry?
How does high inflation affect the hospitality and tourism industry? Tourists have more money to spend. The purchasing power of tourists decreases. Hospitality and tourism businesses employ more employees.
How does inflation affect hotel industry?
“There is not much recent data on the statistical relationship between inflation and hotel performance,” Meliker said. “But the data we have says that inflation is relatively positive for hotel pricing power and ADR [average daily rate] growth. The data also says that inflation is generally positive for hotel cap rates
How does inflation affect the tourism industry?
Not only are restaurants, hotels, shops and other tourism businesses struggling with increased operating costs due to inflation, but they are also working to overcome labor shortages, supply chain disruptions and more. “The tourism industry has not fully recovered from the pandemic.
Are hotels affected by inflation?
Prices in the hotel sector have risen to historic highs as a post-pandemic boom in demand collides with supply pressure from hotels struggling to find and keep workers. May rates were 22.2 percent higher than a year earlier, although the annual inflation rate has begun to decline.
What is the inflation rate for hotels?
| Value from last month | 8.50% |
|---|---|
| Change from last month | -2.35% |
| Value from 1 Year Ago | 3.90% |
| Change from 1 Year ago | 112.8% |
| Frequency | monthly |
How does inflation affect hotels?
But rising labor, construction and supply costs risk affecting hotel company margins despite higher pricing and demand levels. As hotel staff increases, labor costs may rise. Hotel employment is 18 percent below pre-pandemic levels, according to numbers released by the US Department of Labor earlier this month.
What factors affect the hotel industry?
Major external environmental factors affecting hotel performance include local macroeconomic conditions, open business environment, infrastructure quality, level of tourism development, safety and political stability. … … Internal factors can influence the performance of a hotel in different ways.
Although there are many social factors that affect the sustainability of any business in general, the most relevant to the hospitality industry are: Education, Life Expectancy, Income, Television Index, Newspaper Index, and PC index.
What are the factors that affect hospitality?
These factors include culture, peace, security, world development infrastructure, visa facilities, natural beauty, people’s attitude, number of tourists, Quarantine, World population, Education, Income level, Price level of various commodities around the world, different languages and the hotel fee etc…