Pricing and Inflation in the Restaurant Industry

05.16.22 | Restaurant Industry

While owning a restaurant has plenty of benefits, some parts aren’t so glamorous. However, these not-so-fun elements, such as managing finances are equally as important. As a business owner, your overhead costs are constantly shifting. In 2022, rising costs have become increasingly problematic in the hospitality industry and customers are taking notice. According to Restaurant Business Online, restaurant menu prices are increasing at the highest rate in over 40 years. 

Inflation, labour shortages and supply chain issues are some of the dominant factors impacting expenses for restaurant owners in today’s market. 

As a restaurant owner, here are a few things you should know about pricing and inflation in 2022. 

Want to learn more about how the restaurant industry is changing in 2022? Explore our blog post on the topic here

It’s Industry-Wide

Despite what you may think, the rising costs of goods and labour are impacting all restaurants, regardless of size. From your local eatery to international fast-food chains, franchisees, managers and owners alike are feeling the heat of rising costs. As a result, most consumers will be faced with higher prices at their favourite restaurant sooner or later. 

Your Customers Are Already Impacted

As a restaurant owner, navigating your rising operational costs is stressful enough without thinking about how customers may respond to higher menu prices. Will higher prices deter even your most loyal customers? Will you be swarmed with negative online reviews after increasing prices? Despite these anxieties, you should never procrastinate when it comes to protecting your bottom line. 

It’s important to remember that inflation and rising costs are impacting nearly every industry right now. As a result, your customers are constantly adjusting to price hikes everywhere they shop. Although It’s unlikely that a small adjustment to your pricing will totally shock your customer base, taking a balanced and strategic approach to these changes is the best way to remain competitive in the market. 


Want to learn more about the restaurant and hospitality market? Check out these helpful resources. 


Interest Rates and Government Initiatives

As businesses of all sizes adapt to rising costs, governments at the local, provincial and federal levels have introduced new efforts and initiatives to get inflation under control.

To compensate for record-setting inflation, the Bank of Canada (BOC) increased its target interest rate to 1% and economists are predicting another small hike this year. As a restaurant owner, this means any loans you may take out will have greater interest costs compared to 2021 and 2020. That being said, interest rates are still generally low and back to where they were before the pandemic. 

In January of this year, the Ontario government announced $10,000 grants for small businesses experiencing economic challenges. Alongside this, the provincial government also announced it was reducing wholesale alcohol costs for bars and restaurants to help with margins. 

The federal government also offers a number of incentives, grants and support programs for small business owners. Unlike the recently announced Ontario initiatives, these programs are less one-size-fits-all and tailored to the unique needs of each industry. 

How Restaurants Are Cutting Costs

If there’s a silver lining to the broad impact of rising costs, it’s that smaller restaurants can gain insights and ideas about navigating these challenges from their larger counterparts. Of course, every restaurant is unique, however, a handful of notable strategies for price adjustments have been gaining momentum across the industry. 

One way restaurants are cutting back on costs is by switching to an in-house delivery service instead of relying upon third-party apps. As these apps take a small fee, trimming this cost can make a difference in the long run. 

Aside from cutting costs outright, restaurant owners have been leaning on new, outside-of-the-box ideas to stay profitable. For example, some restaurants are redesigning their menus to draw focus toward dishes that have the best margins. In the same vein, others are drumming up excitement with limited-time items that have great margins built-in. 


Think about opening a restaurant? Check out these helpful resources from our blog. 


Get Expert Advice

Owning a restaurant can be stressful, especially when it comes to managing finances. The good news is that you don’t have to navigate the journey on your own. If you’re unsure about how to best adjust pricing to compensate for rising costs, reach out to your hospitality real estate agent. Your agent can connect you with a financial planner or business broker who specializes in working with restaurant owners. 

A financial expert can not only help optimize your current strategy, but they can also help you take advantage of available government programs that you weren’t aware of.

Looking for advice or insights about the restaurant industry? We can help! Contact us.

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