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Inflation throughout the supply chain has driven up food costs for restaurant operators.

Study: Despite Inflation, Customers are Tipping More at Restaurants

SpotOn released the findings of an internal study on the impact of inflation on restaurants across the country. This is the first time the company is releasing insights and analysis of data as an economic indicator. The high-level report shows notable increases on popular menu items and reveals unexpected trends like an increase in tips.

Despite economic factors increasing the prices of orders, SpotOn found that Americans are tipping more. Over the course of six months (October 2021 to April 2022), SpotOn discovered the average price of an order increased by 7%, while the average tip increased by an impressive 9%. This aligns with the recent Consumer Price Index report that shows full-service meals are up 8.7% and take-out is up 7.2% over the last 12 months. This is the largest 12-month increase since the inception of the index in 1997 according to the U.S. Bureau of Labor Statistics. Economists say the trend in increased tipping is correlated to diners having pent-up savings from the pandemic.

Inflation throughout the supply chain has driven up food costs for restaurant operators. Industry suppliers like Tyson saw their average sales prices for the last fiscal quarter rise nearly 20% compared to the previous year. The Producer Price Index found that food prices increased 12.8% year-over-year – 22% for grains, 36.4% for cooking oils, and a whopping 43.9% for beef and veal. These spikes have forced restaurants to adjust prices across the board.

“Pricing is a challenge right now because the inflation rates have gone up,” says Chuck Conrose of Tony’s NY Pizza in Fort Meyers, Florida. “Prices have gone up so we have to neutralize that by raising our prices for our guests. It’s not something I like to do, but we have to pass those costs along so that we can all make money and stay in business.”

An analysis of SpotOn data shows food items experienced an average increase of 6% in cost to customers (the average entree costs $19.50 now including tax). While some increases are expected—like the 4% increase in avocado—in line with previous trends, others came as a surprise to industry veterans. The report reveals there was 7% increase on the price of pizza and a 5% increase in Coke and Diet Coke. French fries have been spared from an increase—giving customers free rein to steal them from other diners’ plates. Wine and soft drinks increased by 6% and 8% respectively. Cocktails and beer have remarkably remained unchanged but some economists predict increases are not far off.

The biggest average price increase appeared in seafood restaurants (up 19%) prompted by the cost of each daily catch. Crustacean lovers saw an 8% increase in lobster, 11% increase in crab, and 14% increase in prawns. While people in the mood for Mexican food will note a 10.5% increase in tacos.

Menu Report Highlights:

  • Pizza: 7% increase
  • Tacos: 10.5% increase
  • Avocado: 4% increase
  • Wine: 6% increase
  • Coke / Diet Coke: 5% increase
  • Prawns: 14% increase
  • Lobster: 8% increase
  • Crab: 11% increase

 

“The fluctuating market will continue to present challenges to maintaining a healthy restaurant profit margin,” says Kevin Bryla, Head of Client Experience of SpotOn. “We are actively working alongside our restaurant clients to ensure they have the technology they need to reduce costs, maximize their staff, optimize operational efficiency, and drive revenue, so they can boost their profit margins—point by point.”

SpotOn tracks industry data and trends to better support its thousands of restaurant clients across the United States. Real-time data and insights help small to mid-sized operators make smart decisions to control costs and drive revenue. SpotOn also provides easy-to-use tools, like its restaurant profit margin calculator, to help clients leverage technology to increase profits, as well as fast and easy loans through SpotOn Capital so they can make smart investments in growing their business.

News and information presented in this release has not been corroborated by FSR, Food News Media, or Journalistic, Inc.