Across the country, the restaurant industry has been scrutinized by consumers for its most recent price increases. In restaurants, food, labor and occupancy costs have always held the majority of operational costs, combining to be approximately 70 cents of every dollar during normal times. Yet since the pandemic began, increases in rent, wholesale food costs, wage increases, and broken supply chains have caused operational costs to skyrocket nationwide. This New York Times interactive article gives consumers an illuminating visual explanation to combat their sticker shock when their bill arrives.
The pandemic has increased hidden costs for restaurants in a way that the public often loses sight of. The costs associated with switching to takeout, to-go items, new operation, new build outs and outdoor seating are just a few hidden costs restaurants have been faced with. According to the U.S. Bureau of Labor Statistics, food inflation alone increased 3.9% in 2020 while overall inflation was just 1.4%. This helps to explain why restaurants have been collectively forced to raise prices, and why many consumers don’t understand why. The idea that prices should remain fixed while the world has changed significantly is the conundrum we wish to address.
This rise in operational costs doesn’t account for the devastating losses the industry continues to face due to COVID. According to a survey conducted by the National Restaurant association, in Wisconsin 71% of restaurant operators reported sales down from what they would normally be in March 2021. At the national level, restaurant sales were down 19% on average. Additionally, 79% of Wisconsin operators say their profit margin is lower than it was prior to the COVID-19 outbreak. In an industry where businesses scrape by on 3-5% profit margins, the financial impact of COVID combined with the dramatic and continued increase of production costs has led to an inevitable outcome: rising prices.
2022 hasn’t provided respite for this rise in costs worldwide; it is no longer just a pandemic or post-pandemic issue. With the war in Ukraine, ongoing labor shortages, and food cost inflation as a whole, restaurant menu price increases are non-negotiable, widespread, and nonetheless wholly loathed by consumers.
Despite the fact that there is so much evidence to validate these increases, it is still difficult for people to wrap their heads around. We see this disillusionment daily in our face-to-face interactions and an ongoing series of 1-star reviews across the internet. And while you’d be hard-pressed to find a consumer running their mouth to a grocery store clerk, restaurant customers don’t hesitate to vocalize their discontent with our prices. We don’t tell the world every time one of our purveyors increase their prices, and we don’t often change our menu prices to reflect these consistent increases. Despite our few-and-far-between price increases over the years, we are bombarded with cynicism when we do have to increase our prices by 50 cents or a dollar. “Seriously, $20 for breakfast!?” People simply don’t want to pay the price for high-quality breakfast food.
The way we see it, McDonalds fucked us. They set the standard long ago that breakfast can be a dollar and takes 30 seconds to make. Their cheap, on-demand breakfast has set an expectation that breakfast food can and should hold to these standards. The perceived value of breakfast food makes it difficult for people to stomach paying $12 for pancakes. Yet we know why our food is the price it is—because it is made to order from scratch with high-quality ingredients. And there is a reason we don’t hire robots; the humans in our kitchen are of the highest quality, too.
We know that (many) customers want their breakfast joint to utilize locally-sourced, organic ingredients when possible to support the community and utilize sustainable practices. We want that as well and pride ourselves in working towards this everyday. We also prioritize paying our employees fair and competitive wages and benefits because they matter to us. But these intentional decisions require financials to back them, and in an industry that exists with ever-dwindling margins, this is a delicate balance. We urge consumers to try to understand recent price increases in our industry as restaurants collectively struggle to survive.
As we crunch numbers and scramble to find alternative solutions, we again are forced to increase our prices, and we know this will be met with increased scrutiny. The reality is that our food and rent bills keep coming (and rising), we care deeply about the livelihoods of our employees, and perhaps most important to our customers, we will continue to be transparent about exactly what we’re putting on their plates. We stand by our decisions to prioritize quality people and products over financial shortcuts and a drive-thru mentality.
Thank you for continuing to support local restaurants through it all—it truly means the world to small businesses like ours.