![]() Menu price inflation hit a 40-year high in March as operators continued increasing prices to compensate for their own spikes in expense, according to federal data released in April. But as consumers face escalating costs at home and restaurants struggle to bring guests back in high numbers, how much of a cost increase on the menu is too much? Matthew Lukosavich, strategy director for the restaurant division of Vericast, told Fast Casual recently that he advises operators to start by raising prices in line with inflation, which is currently around 7-8 percent. From there, try to stay within your ideal ratio for food cost to gross food revenue. Then, find ways to elevate experience and value to make restaurant meals feel more worthwhile. That could mean keeping costs the same but adjusting portion size or substituting a different cut of a meat. You could also lean on limited-time offers to help repackage or resize profitable items. Scrutinize your food and labor costs – maybe there is a marinade that you have always prepared in-house that can easily be swapped out for something ready-made. Consider changing up how you promote your most profitable items through photographs and placement on your menu. To be sure, some costs will feel too high for guests to bear – but who knows? If their spending limit is a bit higher than you think it is, you don’t want to leave money on the table. On the other hand, talk of recession on the horizon may mean your guests are more cautious than usual. Finding ways to make their order feel worthwhile can give you a better sense of where to place that cost boundary without losing profits or guests.
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![]() So much can feel out of control right now with regard to the supplies you need to run your business. One supply (among many) that has been climbing in price and scarcity in recent months is natural gas. In September, CNBC reported that prices had climbed 99 percent higher on a year-to-date basis due to escalating demand and concerns around supply. But unlike the many other items in short supply right now, natural gas consumption is something you can take active steps to reduce in your business without a significant downside. If you experience an especially cold winter or simply broad fluctuations in the traffic coming to you, being more efficient with your natural gas usage in cooking, washing and heating could generate significant savings. The Rail suggests that when cooking, aim to avoid overusing appliances – so limit the time you spend preheating, avoid using a larger oven when a smaller one will do, precook foods in a steamer prior to frying, limit use of the range top and schedule your cooking to ensure you are making most efficient use of ovens and cooktops. When washing, wait to use your dishwasher until it is full, turn off water heaters when the restaurant is closed, and ensure that water tanks and pipes are well insulated. When heating, use smart thermostats and set them to align with the business schedule and occupancy. Finally, keeping appliances maintained, clean, and free of buildup – whether grease, limescale or dust – can help ensure you’re not overusing energy. ![]() Amid supply shortages, rising food prices and wages, and inflation increasing at the highest rate since 1982, restaurant operators have had no choice but to pass some of their costs on to customers. Accordingly, menu price inflation hit a 39-year high in November. Data from the U.S. Bureau of Labor Statistics indicated that prices for limited-service restaurants, which have been hit especially hard by labor shortfalls, have increased nearly 8 percent in the past year, while prices for full-service restaurants have increased 6 percent. While the environment continues to pose challenges to restaurants, there are steps operators can take to strengthen their position. In the back of the house, it’s more important than ever to have a keen grasp of menu costs and to use forecasting tools for inventory and sales in order to minimize waste and find suitable substitutes for ingredients that aren’t available. In the front of the house, it’s crucial to show customers that you provide an experience worth paying for – and one that many of them continue to crave as the pandemic keeps people at home. Consider how to make your offerings special – by elevating the dining experience in-house and developing creative menus that guests wouldn’t prepare for themselves at home. Finally, while you don’t necessarily want to draw guests’ attention to price increases, you can share the efforts you are making to contain costs and source quality ingredients. After all, consumers are paying more at the grocery store now too – so a higher bill at their favorite restaurant shouldn’t come as a shock. ![]() As the supply chain is being impacted by factors including labor shortages, extreme weather, gaps in the availability of raw ingredients, and a spike in demand from consumers returning to foodservice outlets, businesses at every link in the supply chain are feeling the stress. At a time when some foodservice operators have been completely dropped by their distributor(s), the strength of your partnerships is paramount. At the time of this writing, the average fill-rate from manufacturers to distributors was running below 85 percent. But the service level for Premier Value 4 members is considerably higher than this average. That is due to the work our distribution partner, US Foods, is doing to rebalance inventory to provide our members with the best possible service. In recent quarterly earnings releases, US Foods and Sysco disclosed their food cost inflation rates: 8.2 percent and 10.2 percent, respectively. To keep this in context, a normal food cost inflation would be in the 2-3 percent range. Value 4 members have protection against this inflation with contracted manufacturer agreements (CMA). CMA’s give access to 350 vendors covering 105,000 products. Over the past 15 years, inflation on CMA products has been half of the inflation of non-CMA products. Our CMA contracts are firmly in place and while we will not know if that 50 percent “savings” rate is less or more until the current hyper-inflationary period has settled, we are confident that using CMA products is your best protection against inflation – and will offer extra security until we return to conditions that feel closer to normal. If you do not have these protections from your suppliers and partners, consider calling Value 4 to see if you qualify for our programs. |
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