Monday, 31st May Weekly Briefing
The mournful whistle of an approaching express train is heard behind the hill. Since the start of the year I have been talking about this quarter (or maybe the next) as the most critical time for the foodservice sector, notably for restaurants. And now the specific challenges are coming into focus in this country, and in the US.
The challenges for operators are simple: costs are going up, debts are to be repaid and demand is uncertain. Labour, food and beverages account for over 80% of an operator’s costs. Labour shortages are apparent everywhere in foodservice and its supply chain. And so wage costs are rising as the search gathers speed for workers to replace those who have forsaken working in foodservice. And as for food, global dairy prices are up +18% compared with the eve of covid, cereal costs are up +25%, oils up +50%
Pay More – and so costs go up
The reaction everywhere is to pay more – and so costs go up. A 10% increase in wages translates into an overall 5% increase in operator costs, a 10% increase in food prices translates into another 3%. Maybe property costs will be reduced (a bit) creating an overall cost reduction of, say, 2%. In aggregate though, changes of this order mean that operator costs will increase by 5-10%.
Thank you for reading part of the Monday 31st May 2021 Weekly Briefing and full edition can be found at Weekly Briefing Report.
Peters Monthly Report for May 2021 is now available here.
Peter provides consultancy on the eating out market and opens eyes to brand new ways of thinking about the sector and its multiple opportunities for success.