Restaurateurs Warns Customers to Get Used to High Prices as Rent and Labor Costs Drive Inflation
The surge in food inflation at restaurants, driven by increasing rent and labor costs, is leaving Americans with sticker shock when dining out. One restaurateur, Brian Will, owner of Central City Tavern in the Atlanta suburb of Alpharetta, emphasizes that even if inflation rates come down, the impact is lasting, and prices won’t necessarily decrease. Will explains that the compounding nature of inflation means that past increases remain, contributing to sustained high prices.
Impact of Rising Costs:
- Brian Will, owner of Central City Tavern, highlights that rising costs of rent, labor, and other business aspects are contributing to higher prices for consumers.
- The restaurateur sells a BLT for $15.95, and he notes that the price reflects the broader impact of inflation on various components of his business.
Inflation as a Compounding Issue:
- Will dispels the misconception that lower inflation rates translate to reduced prices. He explains that even if inflation drops from higher levels, the accumulated increases persist.
- Inflation is described as a compounding issue, and past inflation percentages remain part of the overall pricing structure.
Challenges in the Restaurant Business:
- Will breaks down the costs involved in running his restaurant, emphasizing that expenses like rent, utilities, and labor contribute to the challenges.
- Despite the cost of ingredients for a sandwich being around $5, inflation in other areas cuts into the gross profit margin.
Business Costs on the Rise:
- Central City Tavern has experienced a 23% increase in the price of a BLT in almost four years, according to Will.
- Ongoing rising costs, especially in labor and rent, have made it difficult for businesses like Central City Tavern to maintain profitability.
Impact of Labor Costs:
- Labor costs have been a significant challenge for Will’s business, with a 30% increase in payroll since the start of the pandemic.
- The restaurant had to cut back on the number of employees due to increased wages, resulting in a situation where they pay more but to fewer individuals.
Persistent Food Inflation:
- While overall inflation has cooled, food prices have been more resilient, especially in the restaurant sector.
- Food inflation at restaurants remains high, with prices up by 5.9% in December year-over-year, compared to the overall inflation rate of 3.4%.
Long-Term Impact:
- Will concludes that even if inflation eases in the future, the damage is already done, and consumers should expect prices to remain relatively high.
The warning from restaurateur Brian Will underscores the lasting impact of inflation on restaurant prices, driven by rising rent and labor costs. Despite potential reductions in inflation rates, the compounding nature of these increases means that consumers may need to accept the reality of higher prices when dining out. The challenges faced by businesses like Central City Tavern highlight the complexities involved in balancing costs and maintaining profitability in the current economic environment.
