As food prices and wage expectations (and legal minimums) rise, restaurants are seeing the impacts on their profit margins.
By the Numbers
Research from PYMNTS’ recent study “Main Street Health Survey Q3 2022: SMBs Battle Inflation,” which draws from a survey of 533 U.S. Main Street small to mid-sized businesses (SMBs), finds that 446 of these businesses, or 84% of them, saw costs, wages or product price increases. Of these, two-thirds of the businesses in the food, entertainment and accommodations segment saw profits decrease, a greater share than that of any other segment.
Why It Matters
These smaller restaurant companies are hard-pressed to price competitively with major brands that have the resources to absorb more of these increases. Take, for instance, The Restaurant Group, owner of London-based multinational restaurant chain Wagamama among other brands. The company’s CEO Andy Hornby spoke to these efforts in a presentation Thursday (Sept. 8) concerning the group’s 2022 interim financial results.
“The one thing I think we’ve been very disciplined on is, we have not passed on all of the cost pressures to customers,” Hornby said of the company’s outperformance relative to competitors. “So, whilst clearly there have been price increases as you would expect in this environment, when you look at the scale of utility cost increases and food input cost increases … I would be 99% certain that the outperformance has been more volume-driven and price-driven versus the competition.”
Read more: Restaurants Aim to Outprice Competitors Amid Rapid Food Inflation
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