6 Ways Restaurateurs Can Fight “Lunchflation” As Costs Rise

This article is for educational purposes and does not constitute legal, financial, or tax advice. For specific advice applicable to your business, please contact a professional.

According to a 2022 Intuit Small Business Insights report, 99% of small business owners are concerned about inflation. More than two-thirds of those surveyed say they have cash flow problems and a third are in favor of an increase in federal interest rates. Not only do business owners see the impact of inflation reflected in their day-to-day operations but consumers are changing their spending habits as well. Of consumers surveyed in the same report, surveyees are cutting back on spending by dining out less, buying essential items only, and using less energy, amongst other changes.

Square data reveals lunch item costs from March 2020 to March 2022 have risen faster than the average cost of all other items at U.S. quick-service restaurants. Here are some items that have been affected by inflation:

Square Lunchflation 2022 Infographic

Although you may see prices rising, you can offset some of these rising costs by optimizing your front-and back-end operations, as well as more closely managing your cash flow.

Reduce overhead with technology tools

While you may not be able to control the cost of goods right now, there are ways you can automate and streamline your business to recoup some of the added funds that are going toward trying to manage the cost of goods increases.

Provide online ordering and delivery

Automated online ordering and delivery services enable restaurants to open up a new channel and reach more customers without taking on huge operational lift. By setting up a first-party ordering and delivery hub, you can retain more of the profits than what you would through third-party online ordering sites.

Offer QR code ordering

With on-table QR codes through self-serve ordering, customers can seat themselves, order themselves, and pay their bill, all through their own devices. QR codes not only provide a more reliable ordering and payments experience, they minimize room for errors, saving time and money. They also help free up time for staff to focus on the customer experience and lessen the need for a full staff on every shift.

Optimize inventory management

Inventory management can help your business battle inflation. Some businesses choose to maintain minimum inventory levels if they can get more raw materials or products at the same costs. This helps alleviate the need to store items or to sell all of the stock. An inventory management system can also help you keep track of the supply and demand of your business by showing you the costs of what you have in stock, how often it needs to be replenished, and how frequently those items or services sell.

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Strategies for navigating inflation

Surging inflation will cause costs to rise, making forecast decisions for your business more uncertain. Leveraging accounting tools like a profit and loss template, balance sheet, and cash flow forecast template regularly can help you see snapshots of your financial health as well as opportunities to cut costs or optimize business operations. There are several ways your business might be impacted by inflation and there are tools you can leverage to help combat it.

Raising prices

In inflationary times you may consider raising prices. As prices of materials needed for goods and services increase as a cost to your business, you may consider passing those costs on to customers through raised prices. Communicating raised prices is important so that your customers understand how prices are changing and why.

Consider alternate materials

From sourcing local raw materials to using alternative raw materials, you may want to consider altering your product offerings slightly to combat inflation. By sourcing your ingredients or materials locally you may be able to reduce shipping and delivery costs as well as delays. You might also want to consider alternative materials. For example, if you are an ice cream maker and strawberries are not in season or harder to find, you may consider a flavor that will be popular with customers while more easily sourced and at a reduced price.

Keep track of your cost of goods sold

With inflation on the rise, everything from your raw materials to gas prices may fluctuate in cost and affect your cost of goods sold. By leveraging business reports such as a sales or inventory report and accounting reports such as a balance sheet, profit and loss statement, and cash flow forecast template, you can gain a more complete view of your business’s finances. Once you see your costs and profit margins laid out in an easy-to-digest manner, you can look for opportunities to prioritize your customers’ demands while balancing costs for your business. Ultimately this will help you more closely manage your cash flow.