You can’t scroll through the news sites without seeing more articles on inflation, but does this mean for restaurants? Modern Restaurant Management (MRM) magazine interviewed expert Kathryn Petralia, co-founder of Kabbage, an American Express company, for her analysis of what restaurant owners need to understand about inflation.
How does inflation affect restaurants?
Changing costs always affect the profitability of operating a restaurant. The unusual part is when inflation affects all parts of the business at the same time and at a faster rate, from labor costs to materials and ingredients. Business owners must regularly keep up with rising costs and adapt. Those who don’t effectively lower their prices.
What are the best practices for restaurant owners and operators to manage costs right now?
Determine if your prices are keeping pace with inflation and maintain a markup that matches the costs associated with paying vendors and staff. Although the short term effects are not obvious, they can be costly in the long term. The results you want to avoid are the erosion of profits and the inability to attract and pay qualified employees.
Are restaurants facing the double whammy of labor shortages and supply chain challenges? What advice would you give them to contain costs and stay profitable?
First, these challenges affect all businesses, so know that you are not alone. Restaurant owners should do their best to prioritize staff retention, actively hire for vacant positions, and seek out new technologies that help reduce costs and manage cash flow more effectively. Consider options such as food delivery services to attract and retain new customers, QR codes to reduce menu costs and speed up ordering, use of social media and other potentially low-cost digital means to attract customers, and online business checking accounts that eliminate unnecessary fees. are all great ways to proactively manage costs.
How does inflation affect food prices?
Hiring is difficult, people expect to be paid more, and supply chain disruptions all contribute to food price inflation. Although some food categories have been more affected by inflation than others, everyone is feeling the impact, whether at the restaurant or at the grocery store.
What are best practices for restaurateurs to raise menu prices the right way?
Everyone is aware of our unique economic situation and hopefully is more understanding when restaurateurs need to adapt accordingly. However, if a restaurant owner is really looking for a creative way to adapt, changing the menu periodically can be helpful. It’s a fairly easy way to introduce new or seasonal items, which can help justify adjusted prices.
Despite the high rate of inflation, Yelp found that customers are looking for more expensive restaurants? Why do you think that might be?
An interest and willingness to pay more for certain dining experiences is a good sign. As a restaurant owner, I would be optimistic because it shows that customers value quality over cost.