The Cost of Living increase from 2010 to 2020 was a mere 1.6% per year compounded. However, restaurant pricing has increased by over 60% in the past decade. Starbucks prices (on selling hot water) have increased by 39%; Taco Bell by 81%; Pizza Hut by 86% and McDonald’s prices have doubled.
A decade ago, you had to pay a server $5/hour. Today it’s $15/hour at the minimum.
One of our clients ran a 60-seat cantina. With staffing challenges during COVID, they did away with the floor staff. Now you must come to the take-out counter to pick up your food. Tips decreased therefore lowering the cost to the consumer. Table turns increased and net profits increased. However, new operations are tending to be moving towards much smaller footprints. Today, most requests for new restaurant are in the 2,000 SF range. Historically, I have leased dozens of restaurants in the 10,000 SF range. Therefore, I have to do five deals in order to earn the same commissions I did from a single deal. Did I mention credit cards? Think about this -- today the typical full-service restaurant with liquor has credit card charges greater than their sales. Another sad note -- in the New York metro area, sales tax plus real estate taxes exceed profits. So how can an operator deal with these tectonic shifts? One way is to close for lunch Monday through Friday. Among other benefits, that will limit overtime labor costs. Diners that used to be open 24 hours now close by 9 p.m. or 10 p.m. come from? Profits! For example, diners that used to enjoy about 12% profits are struggling to make half of that as pre-tax profit. I used to say to restaurateurs “I don’t care what your food cost is. I don’t care what your labor cost is. But I care very much what is your food plus labor costs.” With food costs and labor costs increased as they have, today it is extremely difficult to hit a prime cost (food + labor) under 65%. And half of operations are closer to 70%. So where do these additional percentage points
HOSPITALITY NEWS OCT | Page 51
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