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Inflation Hitting the Restaurant Industry

by | Aug 29, 2022 | blog, Business, Industry News, Trends | 0 comments

In the wake of the COVID-19 pandemic, as restaurants hoped to recoup shut-down related losses, Black Box Intelligence reports that restaurant numbers are still in decline, now thanks to record-high inflation this summer, says Nation’s Restaurant News (NRN). 

“Year-over-year guest counts have now been in a decline since March, impacting sales and traffic. Same-store sales growth was +1.6% in June — a sharp decline from the +4.9% reported for May and the lowest it has been since February of 2021. Same-store traffic growth also fell, but by a smaller margin than sales. Traffic growth was -4.8% in June — down from -2.9% in May,” this article states, citing that the consumer is under pressure from increased gas prices, grocery cost, rising rent—and restaurant expenses are a much lower priority. 

Only quick-serve restaurants reported any gains, as “dining out” now constitutes the most affordable option for the consumer. “Quick service was the only segment to experience year-over-year sales growth in June. While fast casual also saw a small decline in year-over-year sales growth, the segment managed to take the lead as the best performing segment in same-store sales growth,” writes NRN.

Obviously, restaurants are responding to inflation just as consumers are, but the result doesn’t necessarily mean recovering losses. “The most immediate response has been largely unanimous among restaurants: raise prices. The result? Industry-wide price increases have driven up check performance. Year-over-year, average guest checks grew by almost 7% in June — a rate double long-term norms…Black Box Intelligence data suggests a more moderate approach to price increases will benefit restaurant companies looking to hold or strengthen their position in the market.”

Our restaurant consultants are here to give advice as well. Richard Weil, owner and principal of National Restaurant Consultants says, “Make a total review of all components that drive cost of goods: your menu product mix, portions, and alternative good quality items that can provide similar or close to equal ingredient or guest experience. Don’t just look for the raising of menu prices as the catch all for curing cost of goods.” This is part of a National Restaurant Consultants business analysis. Get in touch with a restaurant consultant today!