Food prices overtake rent and rates as greatest overhead

A survey of 200 UK restaurants, supported by industry data, from Livebookings found that 74% of restaurants cite food costs as the factor that has most impacted menu prices in the last six months, followed by tighter consumer budgets and staff costs.

Nine out of 10 respondents reported a rise in their food bill over the last two quarters, and said that in the last six months food costs were the single biggest expenditure to increase.

Livebookings’ European Dining Index found that food costs rank higher than any other expenditure for 24% of restaurateurs, and come second only to staff costs, which remain the principal cost base for 34% of restaurants.

Rent and rates have dropped within the list of outgoings, and compared to the number of restaurants, whose highest cost is the staff wage bill, only half as many say the same thing about what they spend on utilities (18%).

The report says that extreme weather conditions followed by low harvest yields, which for over a year have been impacting the global price of wheat, dairy and meat, have now filtered through to the UK hospitality industry.

Knock-on effects reported by UK restaurants include: changing their menus more frequently as they react to price changes; increasing their efforts to source locally as a way to control costs; re-structuring relationships with suppliers to protect against price changes where possible; and an increased need for communicating changes to customers.

Colin Tenwick, chief executive of Livebookings, said: “They have survived the recent economic decline, and are seeing improvement in the number of customers through the door, but many restaurants operating today are still facing a daily mission to maintain a sustainable profit margin.

“The rising cost of produce creates a need to constantly reassess their supply chain, and what they offer to customers. No doubt the industry will show its characteristic resilience and creativity to overcome the challenge, and it’s likely we’ll see a rise in things like single concept restaurants as restaurant owners aim to tightly control their cost centres, and protect their margin.”