Inflation adds to pressures in the restaurant sector

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A survey by Alignable Research Center found that 72% of restaurant owners say they will close if inflation does not moderate. About half said inflationary pressures could force them to close their businesses in the next six months, and a quarter are very worried about having to close.

Of all small business owners, 1% said they had already closed due to soaring costs, and 1% said they would not be visiting in July. Half of restaurateurs said their essential costs had risen by 25% and only 16% said they were able to cover price increases by raising prices. Restaurant owners also said it wasn’t just margin squeeze that was the problem, with 44% saying their sales were down 50%, less than their pre-November sales. covid-19.

Wells Fargo Securities economists said restaurants are trying to operate amid a perfect storm with inflationary food prices, labor constraints and rising rents as consumers spend more of their budget on gas, which can lead to fewer meals out and more dinners at home.

Alignable reports indicate that the restaurant industry saw a 7.2% increase in menu prices in April, due to soaring cost increases they are seeing due to a combination of disruptions in the supply chain, a sudden increase in demand and disruptions such as Russia’s invasion of Ukraine.

“It’s only a matter of time before we run out of working capital to operate,” one of the small businesses interviewed told Alignable. “I’m about to lose everything.”

HIGHER PRICES, LESS TRAFFIC
The NPD Group reports that food inflation and rising costs caused the price of a restaurant meal to rise 9% in April compared to the same pre-pandemic month in 2019. Restaurant traffic in April was lower from 11% to the pre-pandemic level in April 2019 .

The 1% increase in consumer spending at restaurants in April from a year ago reflected higher prices more than increased restaurant usage, according to NPD’s daily tracker of the U.S. food industry. restoration. The NPD reports that online and physical visits to quick service restaurants fell 4% in April from a year ago and are 6% below the pre-pandemic baseline of April 2019. The NPD traffic to full-service restaurants, which has seen the steepest declines during the pandemic, fell 3% in April from a year ago, or 31% less than visits in April 2019, reports the NDP.

“Rising prices are putting pressure on consumers which is contributing to the slowdown in the restaurant industry. For many consumers, it’s more affordable to eat at home,” noted David Portalatin, NPD food industry advisor and author of Eating Patterns in America. “This is when carriers need to demonstrate their value to consumers struggling with inflation and be solution-oriented to help consumers meet needs at all stages of life.”

Portalatin said rising restaurant prices and other inflationary pressures had the biggest impact on low-income households with children. For consumers in households with annual incomes below $50,000, restaurant visits were down 11% in April 2022 compared to the same month a year ago.

Traffic for households with children under the age of 6 fell 8% and 9% for households with children aged 6 to 12 in April compared to a year ago. Restaurant visits from groups with children, from the same household or not, were down 14% from a year ago, while traffic from adult-only groups was up 1% in April compared to April 2021, NPD reported.

RETRACTABLE MENU
Menus nationwide have 13% fewer items than before the pandemic, and customers are okay with that, according to Brian Warrener, a Johnson & Wales University professor and food industry expert and drinks. He said that by focusing on fewer items and doing them well, restaurateurs can save on labor and cost of goods. Cross-using ingredients and cutting out an extra topping or sauce also makes the job easier.

Warrener, speaking this week at the 2022 National Restaurant Associations Show in Chicago, said that in addition to inflationary pressures, supply chain issues are also an issue for restaurant owners.

Switching to foods less affected by supply issues, such as local staples and ingredients, can also be an effective approach. He said the price difference between local niche products and domestic products might also decrease as shipping costs increase, so remember to compare prices.

Warrener said just-in-time inventory is no longer working and is urging restaurant owners to stock up on items like take-out containers and other non-food items when they can find low prices.

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