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What Higher Inflation Means for Your Restaurant

Find out how higher inflation may affect your restaurant and what options you have to overcome it.

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The past few years have been hard for everyone. But it’s been especially challenging for restaurant owners and staff. 

And even if it seems like the most uncertain of times are over, there’s no time for respite just yet. We’re only now starting to see how inflation behaves in restaurants, and it’s not pretty. 

Not to be dramatic, but there’s no variety of slip-resistant footwear that can save you from this mess. Let’s take a look at how inflation affects the hospitality industry (specifically restaurants). 

What’s the Latest Inflation Situation?

Maybe you’ve been hearing the word “inflation” thrown around so often that you’re at the point where you’re too afraid to ask for a definition. Let’s back up a bit and look at the larger picture.

Simply put, inflation is what happens when the price of everything goes up. This includes prices for goods, services, commodities — the list could go on to include everything that you’d ever need to buy.

This price increase in itself isn’t necessarily a problem. The problem emerges when our purchasing power stays the same while prices increase. Suddenly, the average individual can’t buy as much with their money as they could before. This makes it harder for people (and businesses) to get by.  

Consumer prices are up 9.1%, the largest increase in 40 years. There are many different causes for inflation, and right now we’re facing the perfect storm. Instability in Europe, pandemic-related supply chain issues, and a sudden demand for certain goods and services are all contributing factors. 

How Does Inflation Affect the Hospitality Industry? 

We’re not far enough removed from the plight of restaurants during the pandemic to forget their struggles just yet. The impact of COVID-19 on the industry was devastating. 

For many, the reality was having to let go of valued employees. For others, it meant pivoting to a takeout-only model, as they worked hard to feed hungry office-turned-work-from-home employees and exhausted healthcare employees. 

For many restaurant owners, it meant facing the hard decision to shut down their business — a sad outcome for more than 100,000 establishments across the country.

So while it may seem like we’re hearing less about restaurants going out of business compared to the beginning of the pandemic, the hospitality industry as a whole is far from out of the woods. 

For the businesses that survived, inflation represents a whole new battle, and it’s a complex one at that. Inflation affects life in the hospitality industry (specifically restaurants) in the following ways:

  • Labor sourcing: although jobs in the hospitality industry are incredibly demanding and require a wide skill set, they are notoriously low-paying. This is especially true for restaurant workers who may be paid a lower “server’s wage” that relies on customer tips to fill in the gaps. Unfortunately, with everyone’s purse strings tightening up, these tips are likely to be lacking more than ever — and even if they’re coming in, it’s still not enough of a living wage for many restaurant workers. 
  • Cost of sales: restaurants rely on affordable ingredient sourcing to ensure that they’re making a healthy profit on their menu choices. As the cost of goods increase, it becomes harder and harder to make a profit and something’s got to give (more on this a bit later). 
  • Customer habits: although restaurant visits are enjoyable and certainly enrich our lives, they’re also one of the first things that people cut out when they’re struggling to make ends meet. Higher costs of living mean that fewer people are dining in (or out) at restaurants — and even those who can afford patronage are likely to visit infrequently. 
  • Staff retention: not only is it hard to find restaurant staff in times of tough living, but it’s also hard to keep them as well. Restaurant work is difficult, and it’s not unusual for staff to leave for greener pastures. And let’s face it, when customers are stressed and struggling to live, customers can get rude, and this can quickly create a toxic work environment

Adapt or Close Down: Restaurant Owners Sing the Inflation Blues 

The above is obviously not a recipe for success (pun intended). Luckily, though, folks in the restaurant industry are a scrappy (pun again) bunch and have a few options on their plate (sorry I’ll stop) before they throw in the white and red checkered kitchen towel (ok I lied but last one I promise). 

Unfortunately, the equation of inflation + restaurants is not an easy one to solve. And oftentimes restaurateurs have no choice but to turn to solutions that create misery for their employees, customers, and themselves. Check it out:

SolutionProsCons
Increase menu pricesImprove profit marginsUpsets customer base
Creates bad press
Minimal impact
RebrandCreate new revenue streamsCostly
Time-consuming
Lay off staffExpenses decreaseLowers morale
Harms relationships
Harms customer experience
Close up shopNo real benefitDestroys livelihood for entire workforce 
Reduce portion sizeReduces cost of saleUpset customer base
Harm reputation
Change menu offeringsReduces cost of saleCreates opportunity for creativity
Keeps customer base happy

As you can see, none of the options are perfectly ideal. But there is one option that stands out as the clear winner among the rest: change menu offerings. While it can be hard for customers to adjust to a revised menu, it’s arguably harder for them to adjust to a revised pricing structure. So before you go ahead and price out your customers just yet, think about creating an inflation-friendly menu instead. This will allow you to make creative tweaks to your menu that benefit your bottom line instead of increasing your prices and alienating your customers. 

The Bottom Line

In hard economic times, the relationship that you build with your customers are more important than ever. A strong SMS marketing strategy is a great way to make sure your messaging remains clear and your customers stay in the loop.

With SimpleTexting, you can send your customers important updates via real-time texts. Start your 14-day free trial today or request a software demo. Or you can text or call us at (866) 450 4815 or even drop us a line in the chat window below. Running a restaurant is hard, but you’re not alone. Find out how SimpleTexting can help.

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