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How much do you think restaurant prices will increase as we emerge from the pandemic? —Joe B., St. Louis
Last year, as supply chains were disrupted across the globe, consumers felt the pinch in every commodity sector, from food to personal finance.
Restaurant patrons first saw take-out prices rise in response to stiff third-party delivery fees. As eateries reopened, some of them raised in-house menu prices (in response to increased food and labor costs), while others resisted (though you can’t blame a person for wanting to charge more for chicken wings when the cost of frying oil is four times what it was a year ago and the price of the raw product has tripled).
This spring brings with it another perfect storm of restaurant calamities—continued food and dry-goods supply shortages, higher labor prices, and minimal labor supply—all inflicted on an industry in which the average profit is only 5–8 percent. Menu price increases this year are inevitable, so expect prices to increase 10–15 percent and perhaps more before the end of summer.
We asked several restaurant owners how they plan to deal with the current situation.
Chris Kelling, Elmwood: "I don’t know how to answer this in fewer than 1,000 words, so I’ll simply say, 'Not enough.' We have to stop exploiting people by having them work what are very demanding jobs for such low wages. We have to look at what’s on the plate and ask ourselves, ‘Do guests actually notice the quality difference in ordering from small farms versus broadline suppliers?’ Based on the acclaim and business levels of some of the restaurants choosing the latter route, I’d argue provenance isn’t detectable or of high importance to most guests. We ultimately have to ask ourselves how we define success: Is it a busy restaurant that people love that makes no money? Is it a profitable restaurant where the workers aren’t paid a fair wage? Or is there some way to do it so almost everyone is happy? We’re going to try to do it that third way, but who knows how it’ll go."
Tony Almond, Almond's: "I believe two main factors will determine the cost of doing business after the pandemic. Labor costs (minimum wage increase) and cost of goods sold. Both have already gone up. This will increase the cost of doing business. It will be a question of survival for restaurants and the knee jerk reaction will be to raise prices and pass them on to the consumer. My best guess will be a 15–30 percent increase in menu prices. I will try and hold my prices as long as possible to keep my competitive edge and loyal customer base. My business model is to constantly monitor all costs of doing business to prevent automatically passing them on to our customers."
Dave Bailey, Baileys' Restaurants: "Places will try to keep prices down, but some of the increases for product will have to be passed on if they settle in at the currently inflated prices. That said, the more volume we all do, the less pressure to raise prices... If we can keep our volume trending up, that helps make up for some of those increased costs. At the end of the day, though, increased prices also translate to raises for the crew and helping us balance the inequities between the front and back of house."
Steve Gontram, 5 Star Burgers: "The pandemic has turned the restaurant industry upside down. Not only has business been curbed, but food distributors have been limited, product lines deleted, food sources altered, and restaurant concepts have pivoted as a reaction to the turmoil beset upon us by coronavirus. There has not been a week during the past year that I haven't had to deal with any of the following: rising prices of food, paper, and chemicals, shortage/outage of those items, shortage of labor, rising costs of labor, rising costs of healthcare, and the added expense of outfitting a brand new outside dining room. Many of these issues still befall us as faulty supply chains continue to be news. What will it all mean for consumers? I firmly believe that the pandemic should be a siren call for the restaurant industry. We should be mindful that this worldwide phenomenon could happen again. We should all want to provide our employees with a proper healthcare plan, as well as other benefits. We should all want to pay our employees a healthy, living wage. Many restaurants that I know have already adopted these labor-positive measures. It starts with charging a proper price for a quality meal. As a society, we must be willing to pay a little more to allow the restaurant industry to take care of its employees. I am proud to say that 5 Star adopted price increases to deal with these issues when reopening in May 2020 from the two-month pandemic shutdown. Fortunately, we are positioned, price-wise, for the foreseeable future. I see most mom-and-pop restaurants have also taken action, but it concerns me that most chain restaurants are seemingly relying on cheap pricing as a strategy to win back customers over the past year."
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