Every week we comb through the news to find employment trends affecting the hospitality industry so you don’t have to. This week’s topic: rising food costs.
In terms of challenges impacting the hospitality industry, staff shortages have been dominating the news the past several months. But according to a recent study by Quadrant Strategies, there’s a bigger concern on the forefront – rising food costs.
How will rising food costs impact your business?
Quadrant Strategies study shows that almost 50% of operators cite the “increasing cost of goods” as the top concern at their restaurant. And it’s no wonder that this is topping the list; rising food costs can affect your bottom line and lead to a price increase on menu items. During this recovery period that the hospitality industry is currently in, neither of these outcomes are favorable.
There are several reasons restaurant operators are seeing a rise in food costs. Inflation rose more than 5% over 12 months (ending in May), which is the biggest spike we’ve seen since 2008 (via the Bureau of Labor Statistics). While experts hope this rise is temporary, it’s not unusual to for costs to increase over time. But other issues, like shipping and weather (think droughts or unusually high heat) are an indication that the rise in food costs is long term and needs to be factored in when planning for the rest of 2021.
Some managers have chosen to combat the overwhelming employee shortage by increasing hourly pay or offering sign on bonuses. Combined with growing food costs, this can lead to a huge change in expenses for your business. Below we’ve put together a few tips for restaurants who are dealing with an increase in food costs:
- Consider what items can be cut from your menu. Think things that are out of season or unpopular with guests.
- Communicate cost increases with your team. Customers may be wondering why they’re seeing price adjustments on the menu. Giving your team a heads up beforehand can help answer some of the questions guests may have.
- Think outside of the box when (re)imagining your menu. Recently the popular, nationwide chicken wing chain, Wingstop, launched a virtual brand called Thighstop. Though there are other reasons, the driving factor behind creating Thighstop is to combat a rise in wing prices in favor of a less expensive – the chicken thigh. This type of creative thinking can have a huge impact on guest perception and revenue.