In May 2022, the U.S. inflation rate climbed to 8.6%, the highest level since 1981. With inflation at a more than 40-year high, prices for goods and services are soaring, and that includes food. In just one year, from May 2021 to May 2022, food prices in the U.S. shot up by 10.1% and menu prices went up by 7.4%.
Meanwhile, a 2022 survey by sales and marketing agency Acosta found that 54% of U.S. consumers are dining out less often due to inflation. And about one-third of consumers are opting for less expensive restaurant meals to combat rising prices. Nonetheless, U.S. restaurant spending ticked up by 0.7% from April 2022 to May 2022.
Simply put, inflation is taking a bite out of restaurant revenue. Sadly, 72% of restaurant owners surveyed in May 2022 by small business referral network Alignable expressed concern about their small business closing within the next six months due to inflation.
What follows are four ways that restaurants (and consumers) are trying to combat inflation.
1. Controlling costs with the right POS system
The right POS system can do wonders for a restaurant’s budget. For instance, it can streamline operations related to areas like food inventory and sales.
A POS system typically requires a one-time purchase and in some cases low monthly subscription costs. However, the money spent on a system and monthly subscription can pay off over the long haul in terms of the ability to slash expenses.
Based on one estimate, a restaurant ringing up $600,000 in annual sales could see a 4.25% rise in yearly revenue by installing the right POS system. Those numbers indicate that a restaurant could recoup costs associated with a POS system in a relatively short period of time.
2. Tracking inventory
Some restaurants are turning to inventory tracking as a way to counteract inflation.
Inventory management software is common in the retail, warehouse and logistics sectors, but it’s less prevalent in the restaurant industry. Especially when it comes to food, failing to adopt inventory management software can be shortsighted. Why? Because food represents 28% to 35% of the expenses for a profitable restaurant.
Monitoring inventory on either a daily or weekly basis can give a restaurant better insights into costs and profits by scrutinizing food that’s used, left over or wasted. Restaurants that aren’t closely tracking their inventory might be leaving money on the table.
Keep in mind that the best inventory system integrates with your POS system to improve inventory tracking and control fluctuations in food and beverage costs.
3. Reducing portion sizes
Are portion sizes going to shrink due to inflation? Most American restaurant customers think so.
Nearly three-fourths of U.S. diners believe that restaurants will corral rising food costs by slimming down portion sizes while charging the same prices, according to a 2022 survey commissioned by MarketMan. The company produces software for back-of-the-house restaurant management.
From a restaurant’s standpoint, a reducing-the-portion-size strategy for combating inflation can work as long as the restaurant is transparent about any decrease in portion sizes. No customer likes being surprised about getting less food yet paying the same amount or more for it.
Inventory management software can aid the effort to regulate portion sizes.
4. Preventing food waste
Preventing food waste isn’t just good for the environment. It’s good for a restaurant’s bottom line.
A 2019 report from the Champions 12.3 sustainability coalition found that among 114 restaurants in 12 countries, the average restaurant saved $7 for every $1 invested in reducing food waste in its kitchen.
Across the restaurant industry, food waste is a huge issue. U.S. restaurants generate an estimated 22 billion to 33 billion pounds of food waste each year. About 4% to 10% of food purchased by restaurants is wasted before it even reaches customers. Meanwhile, an average diner leaves 17% of their meals untouched, and 55% of edible leftovers aren’t taken home by diners.
Consumers, restaurant owners and restaurant operators all can fight inflation by changing their practices to cut back on food waste. For restaurants, a key tool in this undertaking is inventory management software.