For restaurants fighting inflation, policymakers can help
The price of chicken wings skyrocketed 40 percent in 2021 and continues to rise. Now that favorite summer staple, ice cream, is suffering similar impacts. No matter what—or where—you might eat out, the ingredients that go into your meal, snack, dessert, or beverage are likely far more expensive than they used to be.
Such news will come as no surprise to most Americans, who have had to dig deeper in recent months. Inflation is affecting food costs across the board, but the consequences are not spread equally.
Restaurants are struggling with hits from every direction. From one side, they are suffering price hikes on menu ingredients, supplies, energy and more. From the other, customers are extremely price-sensitive right now. If a family is spending extra on groceries, they often make up the difference by dining out less. Restaurants are under immense pressure to offer competitive prices to keep tables, booths, and takeout queues full.
The results are disproportionate. Wholesale food prices have risen 15.6 percent since this time last year. Grocery stores were compelled to raise their prices by 11.9 percent between May 2021 and May 2022. Restaurants, however, have only raised menu prices 7.4 percent in the same timeframe.
If restaurants are absorbing more than half of wholesale food price increases, they must make it up elsewhere. They aren’t doing it by cutting payroll. In fact, according to Bureau of Labor Statistics data, average earnings for eating and drinking place workers jumped 15.1 percent between December 2020 and December 2021, the largest 12-month increase on record. Since May 2021, those wages are up over 10%.
Restaurants have always survived on razor-thin margins. Historically, for every dollar a customer spends in a restaurant, 33 cents would go to food costs, 33 cents to labor costs, and 29 cents to other costs, like rent, utilities, and supplies. Even in the best of times, a restaurant earned just a nickel on each customer dollar. With the cost of nearly everything going up, restaurant income has plunged 75 percent—leaving margins just above a mere 1 percent.
No wonder 57 percent of restaurant operators say they’re falling behind on expenses.
Sadly, when it comes to inflation, there is no silver bullet. But that doesn’t give our elected leaders a free pass. On the contrary, there’s much Congress and the Biden administration can still do.
A great example of progress is the bipartisan Ocean Shipping Reform Act, which was championed by Sens. Amy Klobuchar (D-Minn.) and John Thune (R-S.D.) and signed into law by President Biden. The bill will help control shipping rates, which get bundled into the cost of food and other goods, while also improving reliability to relieve supply chain bottlenecks.
Policymakers should take this success as a model and move rapidly on additional measures, from international trade to transportation to second chance hiring. For instance, 201 tariffs remain in place on imports from China. Lifting them would ease prices on food and back-of-house products restaurants need. By the same token, ending the 232 international steel and aluminum tariffs would help control production costs, from equipment to canned goods.
Within U.S. borders, we need to move products from ship to shelves faster and cheaper. That means trucking. The DRIVE Safe Act contains provisions that would help address the national truck driver shortage. Fortunately, the infrastructure bill included a pilot program and funding based on the DRIVE Safe Act so initial steps are in place, upon which we can build.
Finally, Congress can help match willing workers with willing employers. Commonsense immigration reform can create a clear path to legalization—and legal work—for the more than 11 million undocumented individuals living in the U.S. The nation’s visa program must be modernized to meet today’s talent needs with non-immigrant workers in occupations that do not require a college degree. Government-private sector partnerships should also expand employment opportunities for formerly incarcerated individuals who deserve a chance at a good job.
Restaurants have survived some of the most challenging economic circumstances in living memory—relying on grit, determination, and customers’ ongoing support. If we can count on elected leaders to address inflation, restaurants will remain our community cornerstones throughout 2022 and beyond.
Sean Kennedy is the Executive Vice President of Public Affairs for the National Restaurant Association.
Source: TEST FEED1
