Together, food and labor costs account for about two-thirds of every dollar of a typical restaurant’s sales.1 That’s why 2022 has proved so challenging for restaurant operators and their bottom line.
After increasing wages to attract staff following the initial closures and resignations caused by the pandemic, operators have been hit hard by food price inflation. In confronting this one-two punch, each operator has had to decide how much of those cost increases to pass on to customers, given that some food inflation may be short-lived.
Restaurants — independents, franchisees and chain stores — have increased wages not only to attract workers, but also to compete with other employers, particularly large retail outlets that have upped their minimum hourly wages. “The change in the industry’s labor cost structure is permanent,” says vice chairman of investment banking for BofA Securities, Roger Matthews. “When major employers like Target, Amazon and CVS move to a $15 wage, it doesn’t matter what the federal minimum wage is. Restaurants have to compete.”