Dishing Up Resilience: How Small Restaurants Navigate Inflation Now and Then

The restaurant industry is facing a tough challenge as inflation drives up the costs of food, labor, and rent. Many restaurant owners and workers are struggling to survive and adapt to the changing economic landscape.

Inflation is the general increase in the prices of goods and services over time. It affects everyone, but some industries are more vulnerable than others. The restaurant industry is one of them, as it operates on thin margins and relies on a steady supply of customers and ingredients.

According to the Bureau of Labor Statistics, the consumer price index for food away from home rose 4.2% in the 12 months ending in September 2023, with the fastest increase since 2008. This means that the average cost of eating out has gone up by more than 4% in a year.

To understand the impact of inflation on the restaurant industry, it is helpful to look back at the 2008 financial crisis, which was a major economic downturn that affected many small businesses.

James Sherwood is a former restaurant owner who turned to ranching when the aftermath of the 2008 financial crisis caused him to sell his restaurant in early 2010. His firsthand experience provides insights into the challenges faced by small businesses during economic downturns and provides a valuable frame of reference for understanding present circumstances.

One of the ways small business owners are contending with current inflation is by raising menu prices. During the 2008 crisis, James Sherwood did the same: “You don’t want to run the customers off – we just increased [prices] a little bit to try to offset some of the costs. And then I cut my salary and just let the restaurant continue to operate and I didn’t pay myself as much,” Sherwood said.

James Sherwood’s story is a testament to the realities faced by small business owners during economic downturns, and a reminder of the human cost of financial crises.

Fast forward to the present day, the restaurant industry is once again grappling with a crisis in the economy. The main drivers of inflation in the restaurant industry – rising costs of food, labor, and rent – remain as pertinent today as they were in 2008; and Sherwood’s experience echoes the struggles that many of today’s small business owners face.

But, how are today’s restaurants adapting to these challenges? One such example is Grumps, a small business restaurant with locations in Cleburne, Granbury, and Stephenville, TX.

Today’s inflation is affecting not just business owners, but also the workers at the bottom of the industry hierarchy. Jack is a Sophomore in college and a waiter at a local restaurant in New Braunfels who agreed to share his perspective.

He expressed that he has seen a general decline in his income and tips as customers become more frugal and less frequent. “I, a lot of the time, have to work longer hours and sometimes take on extra shifts, you know. I also have to deal with frustrated customers who complain about the prices, and so on. Some of them don’t even tip at all. It’s pretty exhausting,” Jack said.

Jack expressed that he hopes that the situation will improve, but, as of now, he does not feel particularly optimistic.

Behind every statistic, there’s a story. And we can all play a part in helping the restaurant industry survive and thrive. Here are some ways that you can support your local restaurants:

  • Tip generously. Tipping is a great way to show appreciation and gratitude to your favorite restaurant’s staff. Tipping also helps them supplement their income, which may not be enough to cover certain living expenses.
  • Order takeout. Ordering takeout is a convenient and safe way to enjoy your favorite dishes at home. Ordering takeout also helps the restaurant save on labor and overhead costs, and allows them to serve more customers in a shorter time.
  • Write positive reviews. Writing positive reviews is a simple and effective way of spreading the word and boosting the reputation of your favorite local eateries. Writing positive reviews also helps the restaurant attract more customers, and gives them feedback on how to improve their overall quality.

Click here to learn more about food inflation.

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