Inflation Hits 40-Year High of 7.5%: What It Means for Restaurants

As supply-chain issues continue to wreak havoc on the restaurant industry, yet another blow was dealt last week when the U.S. Department of Labor announced that consumer prices increased 7.5% for the rolling 12 months, marking the steepest 12-month inflation rate jump since February 1982.

Inflation impacts restaurants in a variety of ways, but it hits them hardest in basic food costs. According to the report, the largest 12-month increases in food costs were in meats, poultry, fish and eggs, which rose 12.2 percent over the year. Meanwhile, the index for food away from home rose 6.4% in the last 12 months, including an 8% increase for limited-service meals (fast food, fast-casual, etc.) and a 7.1% increase for full-service restaurants.

Combine these statistics with supply-chain issues, the labor shortage and the fact that wages are rising at the fastest pace in 20 years and it puts restaurants in a position for some difficult decisions ahead, particularly with menu prices, which can be a difficult balance to strike for both franchises and mom-and-pop businesses.`

“We’ve had to go up on our prices, which the customer has probably started to notice,” Robert Williams, owner of Alexander’s Great Barbeque in Augusta, Ga., told a local news station in November. “It has decreased our sales some, so we’re trying to adjust with that, but we’ve noticed it because our customer base is starting to decrease some.”

According to the Associated Press, Chipotle said that it has increased menu prices by 10% to offset the rising costs of beef, transportation and higher employee wages, and that it will consider further price increases if inflation keeps rising.

It’s unclear whether this is the tipping point or we’re headed for more of the same when it comes to inflation and price increases. But how businesses navigate this uncertain time could determine which flourish, and which become further casualties of the COVID-19 pandemic and its fallout.