Rising costs threaten restaurants’ recovery

Inflation is hammering restaurants, dismantling the industry’s fragile recovery from pandemic-induced shutdowns just as customers resume dining out.

The price of produce, meat, oils and even non-food items like heat lamps and to-go containers has skyrocketed, saddling restaurants with unprecedented costs. And supply chain disruptions are making it difficult for smaller, independent restaurants to secure essential products in the first place.

Surging prices and scarcity of goods — coming on top of severe workforce shortages and relatively weak demand for dining-out — has left restaurant groups appealing to Congress for help, warning of further negative impacts without another round of federal relief.

The U.S. experienced the highest rate of inflation in three decades over the last year, according to Labor Department data released last week. The price of groceries rose by 5.4 percent year-over-year, with the largest increase — 11.9 percent — coming among meats, poultry, fish and eggs. 

Restaurant owners say they’re dealing with even larger increases for some wholesale products in recent months, costs that are passed on to customers. Prices at full-service restaurants rose by 5.9 percent over last year, the largest annual increase on record. 

“It’s not like prices are going up a little bit. Some products are 50 percent higher than usual. It’s bananas,” said Regina Simmons, owner of Tacotarian, a Las Vegas-based vegan Mexican restaurant. 

Simmons pays the highest possible price to ensure she gets a specific vegan cheese that is in short supply, as she cannot easily substitute it without customers noticing the difference. Price hikes and supply shortages also apply to cups, napkins and other essential products.

Every week, a delivery truck arrives stocked with only some of the items Simmons ordered, forcing her to get in her car and search for the missing products at grocery stores like Whole Foods, where she pays even higher prices. 

“There’s a lot of problems right now because there’s not enough products for everyone,” she said. “It’s a very challenging time for our industry.”

Tyler Akin, a Philadelphia restaurant owner and board member for the Independent Restaurant Coalition, said that the price of food and equipment continues to rise across the board. 

Fryer oil that cost around $30 per unit a year ago now runs for $60 to $70, and the cost of disposable gloves is up 200 percent from pre-pandemic levels, he said. Even surging energy prices are hitting restaurants that invested in propane heaters to facilitate outdoor dining.

“In a year of historic headwinds, it’s really the icing on the cake,” said Akin, who was forced to close one of his restaurants and is not operating two others located near office buildings due to a lack of demand. 

For independent restaurant owners, the pandemic has tested their relationships with distributors and revealed just how difficult it is to compete with large chains, which often get priority on scarce products.

“None of us are acquiring farms and meat producers like larger corporations are able to,” Akin said. “For us, the cost is presented and we take it or leave it.” 

A National Restaurant Association survey in September found that 91 percent of restaurant owners are paying more for food. Three-quarters of those surveyed said they had to change a menu item because they weren’t able to find an ingredient. And 47 percent said they had difficulty obtaining poultry while 45 percent had trouble finding beef.

“It’s very difficult for operators to plan with prices varying so much and supplies not showing up,” said Mike Whatley, vice president for state affairs and grassroots advocacy at the trade group. “You can’t control if the truck shows up and doesn’t have salmon. It just adds to so many more issues.”

The industry group estimates that restaurants lost $300 billion in sales since the beginning of the pandemic and 90,000 restaurants closed their doors permanently or long-term. Demand is recovering, but 78 percent of restaurants say they don’t have enough employees to support a recent uptick in customers amid a tight labor market.

“Restaurants were only just barely beginning to recover, then you have the delta variant, you throw in supply chain issues, inflation, worker shortages, and it’s a perfect storm in terms of stalling the industry’s recovery and putting it in reverse,” Whatley said.

The National Restaurant Association sent a letter to President Biden earlier this month urging his administration to push for immigration reform and expand employment opportunities for formerly incarcerated individuals to combat the worker shortage.

Restaurant groups are also pressing for last-minute additions to Democrats’ $1.75 trillion climate and social spending bill, lobbying for additional relief for restaurants to be included.

The bill, which Speaker Nancy Pelosi (D-Calif.) wants to pass this week, is likely the industry’s last chance to receive more federal aid this year, though its current draft does not include support for restaurants.

Congress provided a $28.6 billion cash infusion to ailing restaurants as part of a Restaurant Revitalization Fund included in Democrats’ COVID-19 stimulus package enacted earlier this year. But the fund quickly ran dry, with two-thirds of restaurants that applied for aid ultimately missing out.

“You always hope that elected leaders can sense reality and have a sense of empathy and are compelled to do the right thing,” Akin said. “But I’m not really seeing it right now.”