Inflation Is Impacting The Restaurant Industry. Here’s How To Fight It.

Inflation Is Impacting The Restaurant Industry. Here’s How To Fight It.
Rizwan Jiwan

By Rizwan Jiwan

7shifts' collects and analyzes large volumes of restaurant data to help inform our machine learning systems that power our Optimal Labor Tool and other efficiency and time-saving features, like the Automatic Scheduler and Labor Cost Savings Calculator.

We also can use the same data to track economic trends in the restaurant industry at large.

Recently our Data Team analyzed the changing economics of restaurants as the Covid-19 pandemic's impact on the restaurant industry wanes in the United States. We also wanted to see if the inflation concerns many are expressing are showing in restaurants as large flows of government stimulus are distributed.

Has the price of going to a restaurant increased?

To answer this question, we compared 2019 vs 2021 restaurant receipts. We found a 14% increase in the total price on a receipt. We also looked to see if the number of items ordered per receipt has stayed the same: they didn't. On average the number of items decreased from 3.8 to 3.5 per receipt. Guests are ordering fewer items and paying more for them.

Inflation Graphs showing growth in total receipt spend.
Reading the X-Axis: The 95th Percentile would represent that 95% of receipts were under $85.47 in 2019 and $99.50 in 2021.

Either diners have switched to ordering the more expensive items off the menu, or we're seeing very strong inflation of prices on menus. The bottom line is that the price of going to a restaurant has increased.

Are restaurant patrons adjusting their tips to help offset these higher prices?

For this question, we also used 2019 vs 2021 tip data. We found that even though the average price on a receipt has gone up 14%, tips went up even more! Patrons are tipping about 18% MORE than they were in 2019.

Inflation Graphs showing growth in total tips spend.
Reading the X-Axis: The 95th Percentile would represent that 95% of tips were under $15.00 in 2019 and $18.26 in 2021.

This is the silver lining: even as menu prices have increased, guests are tipping more. But that doesn't mean it's any easier to make great money in the food and service industry.

Four Ways to Fight Inflation in Your Business

1. Make small menu price adjustments

Some restaurants are taking a direct approach to fight inflation by doing small, “surgical” price increases.

Shake Shack has plans to raise prices in Q4 of 2021 from 3 to 3.5 percent. This is about a percentage more than their annual 2% increase. Ruth's Hospitality Group Inc, parent of Ruth's Chris Steak House, is increasing prices by about 2.5% percent to help offset rising food costs and inflation.

You can fight inflation in your restaurant through small, 3 percent or fewer price increases on select menu items. For example, a 3% increase on a $15 burger would increase the price to just $15.45. It doesn't place too high a burden on the individual guest, but it can have a net-positive impact on your restaurant's profitability.

2. Streamline your menu

If you don't want to ask guests to pay a small amount more, you can maintain menu prices and make changes behind the scenes to save on food costs.

Do an audit on your menu, and check individual item sales. See if there are any items that have high plate cost but aren't frequently ordered, and consider taking them off the menu. This can help reduce your cost of goods sold.

3. Substitute ingredients to save food costs

Removing dishes from your menu isn't the only adjustment you can make. Take a page from Wingstop's playbook: when confronted with high wholesale prices on chicken wings–their namesake offering–they opted to use bone-in chicken thighs instead. They even went so far as to “rebrand” as Thighstop online.

Not all restaurants can make substitute Swapping out a costly nut like pine nuts in your pesto for walnuts or sunflower seeds, or change the fish in your fish & chips to a less expensive kind. You can reduce some of the plate costs, putting money back in your pocket without changing up menu prices on guests.

4. Trim costs in other areas of your business

Food costs and pricing adjustments aren't the only way to increase your profitability. The next largest cost for most restaurants is labor–and there is cash to be saved.

Restaurants that use 7shifts for team management can save up to 3% on labor-related costs each year. By using scheduling software to build and optimize your scheduling, restaurant managers can save money and get their time back.

Data Methodology

  • Data set: 10 million receipts from June + July 2019 reviewed compared to 9 million receipts from June + July 2021 reviewed
  • Data set: 620 companies, 1009 locations
  • Only utilized receipt totals, did not break down into receipt sizes or individual items

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Rizwan Jiwan
Rizwan Jiwan

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