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​Inflationary Pressures Persist

Still, operators can improve their resilience
CPI
Sources: U.S. Bureau of Labor Statistics, Nov. 2021; CNBC (Shaded areas indicate U.S. recessions)
​The dollar isn’t going as far as it once did for American households – and the trend is likely to continue well into 2022. Data released in early December indicated that the Consumer Price Index (CPI), a key measure of inflation, had spiked 6.8 percent for the year through November, marking its fastest climb since 1982. Even the core CPI, which excludes more volatile food and energy components, had increased 4.9 percent. While consumer wages have climbed during this period as well, they haven’t increased enough to keep pace with inflation.
​Meanwhile, restaurant operators have had to pass more of their expenses on to consumers. Econofact reports that food prices have risen at a faster average rate since the start of the pandemic than they did over the previous decade. Specifically, food prices have climbed an average 3.6 percent for store-bought food and 3.9 percent for food purchased away from home on a monthly, year-over-year basis.
wages
Sources: Federal Reserve Bank of Atlanta, Current Population Survey and Bureau of Labor Statistics
foodservice
​Building a better business model

​
So is there hope on the horizon? One bright spot is that operators have been weathering these many challenges better than they probably would have just a couple of years ago. Fitch Ratings said the industry was on stronger footing as a result of the efforts it has made to keep business humming amid virus outbreaks. In a report released in the third quarter, the agency said: “Increased operating efficiency achieved during the pandemic has enhanced restaurants’ ability to manage through the labor shortage, better positioning them to absorb higher compensation and benefit costs where necessary, reducing credit risk for many operators.”

Still, there are steps you can take to enhance the resilience of your operation. Menu engineering will continue to be important in helping operators identify and weed out menu items that aren’t delivering on profit. If you think you need to raise your menu prices, consider any ongoing changes to your labor costs, as well as how inflation is impacting the prices consumers are paying at the grocery store. Assess your food waste to identify where you might resize portions. Look for opportunities to offer premium brands on items (such as alcoholic beverages) that might help you justify a higher price tag, while decreasing your use of premium-brand ingredients that are more likely to disappear into a dish. If you raise prices, do so in small increments across multiple rounds during the year and apply them to individual items instead of to the menu overall. Track your guest response after each price increase to better understand what people are willing to pay. How are your price increases impacting the size of your average check and amount of customer traffic? This information can feed your promotional offers as well by helping you bundle items with costs that offset each other.
If you look back at how your business has evolved since the pandemic began, where have you removed bottlenecks and made day-to-day operations less labor-intensive, less expensive and more efficient overall? Where is there room to make further improvements in 2022?

Team Four Foodservice
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  • Human Resources
  • Inflation
  • Financial Matters
  • Ghost Kitchen
  • Menu
  • Marketing
  • Technology
  • Newsletter
    • Free Newsletter
  • Marketplace
  • #foodsafety
  • Contact