How to Beat Inflation in the Restaurant Industry

Owners of eating and drinking places have been compelled to increase menu prices as a survival strategy. Full-service menu prices jumped 8.8 percent and limited-service menu prices rose 7.1 percent in September year-over-year. However, continuing to raise prices to try to beat inflation could sound the death knell for restaurants at a time when they should be reveling in tune with the Christmas bells.

While battling inflation may not be easy, it is not impossible either. What is needed is a clear strategy that tackles the core concerns of rising costs and diminishing profits. The ‘Trim and Grow’ model addresses both these directly. The premise is very simple: trim expenses and grow revenue. In other words, beating inflation in the restaurant industry takes three steps: trimming food expenses, trimming labor costs and growing revenue.

Step 1: Trimming Food Expenses 

Since food costs generally account for about 35 percent of a restaurant’s total costs, this would be the best place to start to decrease spending. Luckily there are many ways to do this, like, for instance: 

Replacing expensive ingredients with cheaper alternatives

Buying locally saves on transport fees, while buying in bulk is more economical. Value-added ingredients remove much of the prep work. Purchasing vegetables and meats that have been cleaned and cut, halves the work that has to be done in the kitchen. The goal is to pay less without seriously compromising the quality of the final product. 

Including seasonal vegetables and fruits as specials

Because there is an abundance of these goods when harvested, they tend to be cheaper, thus significantly lowering spending. Tweaking the menu to accommodate these more affordable ingredients can stabilize prices. 

Cutting Down Portion sizes

Each year, about 40 million tons of food is thrown out in the US and 40 percent of that comes from restaurants, grocery stores and food service companies. Scaling down servings should leave less on the plate when the table is cleared. More importantly, it brings down the cost of each dish with the ability to make more servings. Of course, this kind of reduction must not be drastic so as to be noticeable. Garnishing and creative plating can also help camouflage the change and prevent irking customers. 

Step 2: Trimming Labor Expenses 

The cost of labor is another sticking point for restaurants, with inflation directly impacting payroll. During pre-pandemic times, in February 2020, the average hourly wage for restaurant staff was $14. Since then, that rate has continued to shoot up, surpassing $17 per hour in August, according to the US Bureau of Labor Statistics. With this upward tick, keeping a full staff base is becoming virtually impossible for restaurant operators. 

In a situation where salaries eat into the precious little profits a restaurant makes, automation is proving to be the most efficient way to curb employee expenditure and thus beat inflation. Online ordering, food ordering apps, self-service kiosks and QR menus cut down the number of humans a restaurant needs by taking on multiple tasks. 

  • Self-service kiosks and QR menus allow customers to place their orders and make payment without the intervention of a waiter. This immediately lowers the front-of-house staffing requirements.
  • Online ordering and food ordering apps reduce the number of phone-in orders. This means one of the wait staff can easily deal with the calls, doing away with the need for a designated phone operator. 

These technologies immediately shrink the requisite staff base. With automation restaurants can easily beat inflation as it lowers the amount of money paid out as remuneration. 

Step 3: Growing Revenue 

While it may seem like a contradiction to consider increasing income when inflation is so high, in reality it is easily achievable. All that is required is a careful restructuring of the menu. The precursor to this is to understand sales patterns – what are the fast moving items, when do they sell, who buys them, what are the less desirable dishes, which offerings bring in the least amount of money etc. 

This is where data analytics come in. Ordering software like the ones previously mentioned  have in-built data analytics that capture vital information on a restaurant’s sales and performance. These figures can be categorized by time, income, demographic and other variables. The insights gained into customer preferences and buying patterns will enable  restaurateurs  to increase earnings in two main ways: 

Creating a more profitable menu

Identifying the most popular and lucrative items as well as the slow moving, less profitable items will help decide which offerings to promote and which to do away with. 

Running promotions and specials 

Awareness of time-based demand will inform when and what to promote, ensuring that any offer is lucrative. 

Saving the Bottom Line

No matter what the motivation may have been for opening it, the longevity of a restaurant is dependent on earnings. If they are to survive, food and beverage outlets need to continue to make money even through the toughest times. By minimizing the outflow and maximizing inflow, the ‘Trim and Grow’ model will help safeguard a restaurant from the damaging impacts of inflation. 

Meta description- Inflation has become a crucial factor of the success or failure of restaurants. Especially, during this festive season it is important to beat the inflation that are faced by restaurant owners by trimming food and labor expenses, while also growing your revenue.