People are hungry to save money these days due to rising prices—whether it’s gas or groceries. In the past 12 months, grocery store prices have jumped 13.1% in the U.S., according to a recent consumer price index.
While it goes against the age-old advice that you save money when you dine at home, eating at restaurants might now be the more affordable option—the cost of dining out has only gone up 7.6% over the same period.
Yes, restaurant prices have increased, but restaurant owners are not exactly bringing in massive profits.
According to the National Restaurant Association’s latest Restaurant Business Conditions Survey from August 2022, 85% of restaurant operators say their restaurant is less profitable now than it was in 2019 before the pandemic. Only 6% of operators say their restaurant is more profitable, while 9% say their profitability has remained about the same.
How can it be that they’ve raised their prices, yet are still less profitable?
According to the National Restaurant Association, restaurants, on average, take home a profit of approximately 4%. So, on your $10 lunch plate, that restaurant owner only made $0.40. Even when they raise the price to $15, their profits barely reflect that price change, going up to a meager $0.60.
So what exactly are you paying for?
If you look at the expenses in the average restaurant, they fall into a few main categories: food, liquor, labor, overhead and building costs.
Let’s take a look at food alone. In February, Restaurant Business reported that producer prices for food are up 13% over the past year, while the average full-service operator only raised their menu prices by 7.1%.
And that’s just one category. Food alone leaves a 5.9% gap where operators are losing money, and each of those remaining categories has increased too, meaning added costs definitely exceed the 4% that an operator was previously left with.
Without substantial price increases, operators continue to risk losing money with every plate they serve. They might as well give you a $5 bill when you walk in the door and send you on your way.
So how can you help as a consumer?
Continue to support your local restaurants! Even as menu prices increase, grocery store prices are rising even faster. So don’t feel bad about spending another night or two per week dining out.
When going out to eat, remember that restaurants are not taking advantage of you by increasing their prices, they are doing what is necessary to keep their business afloat and serve you the delicious food you crave. Now’s the time to go out to eat!
US Foods® has a team of support staff ready to help restaurateurs make it. Our Food Fanatics® Chefs and Restaurant Operations Consultants are available to operators for consultation on menu and business strategies, and our website features helpful content, such as checklists and webinars, to help restaurants maximize their profits and keep fighting inflation.