Many restaurant owners are working to keep menu prices down even as rising costs eat into already slim profit margins, according to two new industry reports.
Americans are dining out less as affordability concerns grow. Combined with rising costs across food, labor, rent and technology, restaurants are feeling the impact.
New reports from the National Restaurant Association and the James Beard Foundation show restaurant owners say managing margins is a constant challenge as prices of multiple products have increased.
Restaurant owner John Simmons is among those who have seen profits slip.
"It added a couple points to my food costs which, that equates to tens of thousands of dollars," he said.
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He is not alone. 42 percent of restaurants said they weren't profitable last year.
Chad Moutray, chief economist for the National Restaurant Association, said rising costs are hitting restaurants from multiple directions. "Well, we've seen overall labor and food costs go up 35% since the pandemic," he said "But it's not just those costs. We've seen insurance and taxes and everything else go up, utility costs, et cetera."
"Those extra costs have really eaten into the bottom line," he added.
The solution isn't as simple as raising menu prices. According to the James Beard Foundation's report, establishments that raised prices by more than 10 percent were most likely to lose customers and then made lower profits.
Anne McBride, vice president of impact at the James Beard Foundation, said restaurants have reached a tipping point with customers.
"Chefs and operators feel that they can no longer pass on any additional increasing costs to their customers. We really hit a spot where consumers, diners, cannot pay any more at restaurants than they already are," she said.
Labor is another top concern, with 49 percent of restaurant operators reporting some level of staffing shortage. That trend could continue as operators look to cut costs.
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McBride said restaurants are restructuring to address the challenge.
"Restaurants are dressing labor shortages by being ruthless in their business structure and looking at, you know, our how many people need to be on the floor at any given time, how many People need to in the kitchen."
According to the latest jobs report, restaurants and bars lost nearly 30,000 jobs in February.
One big silver lining: according to the James Beard Foundation's report, nearly 3 in 4 restaurant operators are optimistic about business for this year.
