Restaurant closures point to more inflation ahead?

by philg

A popular restaurant in booming South Florida, February 22, 2022:

(“Sorry, we are closing for lunch due to staffing. Our new hours of operation are Monday through Saturday, 4:00 pm to 9:00 pm.”)

It took them nearly an hour to put a $28 stew over spaetzle on my table on a Tuesday night (about 80 percent full). Most of this dish would have had to be pre-cooked. The waitress explained “we have only two cooks on the line tonight”.

A few days earlier, I had talked to a restauranteur and chef from Maskachusetts. After several decades, she’d closed her usually-busy restaurant. “I was paying 14-year-olds $20 per hour to wash dishes and I had to train them,” she explained.

With tax and tip, my entrée cost about $36, but what would have been the cost to get food in an amount of time considered normal back in 2019? To me, that’s the inflation that is pent-up in our economy. Maybe the cost to the consumer needs to go to $45, for example, (a 25% bump) in order to give the restaurant enough money to hire additional kitchen staff. The lunch closure, for an Econ 101 student, suggests that whatever the prices that a restaurant can charge to serve lunch aren’t high enough to yield a profit after paying staff to come in during lunch. (A counter-service or fast food restaurant might still be able to survive, though, because their labor cost percentage is lower than at table-service restaurants.)

9 thoughts on “Restaurant closures point to more inflation ahead?”

  1. I don’t understand the permanent sign. It seems like originally they were serving both lunch and dinner between 11:30 and 9. So by closing for lunch, they are not opening until 4. Since lunch originally ended at 3, wouldn’t it make sense for the new hours to be from 3 to 9?

    Also, to Philip’s point, ironically lunch prices tend to be lower, even though it is more expensive for the restaurant to be open during lunch hours (on a per customer) due to the fixed labor costs. Therefore, I’m not saying the restauranteur is wrong; rather, the language on the signs don’t make intuitive sense.

  2. I’m waiting to see when Costco will increase the price on their rotisserie cooked chicken (currently at $4.99) and hotdogs (currently at $1.50). Once that happens, every restaurants and food stores will follow, that’s when the $hit will fly off the fan.

    Btw, I tried their chicken once, too greasy and almost tasteless for me. I have yet to try their hotdogs, maybe I should while they are at $1.50. Their pizza is very good.

    • Their hotdogs are fantastic, and they come with a soda, which is sadly a PepsiCo product. You can load them up with ketchup, mustard, onions, and relish as well. They used to make a great Italian sausage sandwich for $2.99, but that disappeared two years ago never to return 😢

  3. With oil back over $100 & FRED on pace to cross $12 trillion next year, a spaetzle should be $280. These are the days of steep discounts.

  4. “I was paying 14-year-olds $20 per hour to wash dishes and I had to train them,”

    Wow! I washed dishes in a very busy Italian restaurant in the late-70s at 14 y/o for $2.65 per hour, and I came experienced.

    • Raised interest rates will have to wait until after elections….which ones in I’m not sure.

  6. Ivan’s right – that’s what is needed, but nobody in government will do it. Besides, we are far too deep in debt to try what Volker did (with Reagan’s support btw). Everybody – businesses, wall street and government – is addicted to cheap low interest rate money, so things will nose dive even if they try raising by a measly 0.5%. The Fed and the government have painted themselves into a corner.

    I bet they don’t even begin to try to raise interest rates this year! They will chicken out whatever the excuse du jour is (Covid, Russia, etc)

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