David Burke Hospitality Management President David Burke breaks down the cost of restaurant inflation on ‘The Claman Countdown.’
After restaurant stocks served up a mixed earnings bag this season, one Iron Chef America alum is revealing the “No. 1 problem” that’s keeping their prices high and overall profits low.
“The number one problem for us is controlling labor cost,” Chef David Burke said on “The Claman Countdown,” Wednesday. “There’s employees out there, so many employees, they’re commanding top dollar, but not necessarily the top talent.”
“There’s lots of turnover, there’s lots of benefits that are associated, depending on whether you’re in the city or the suburbs,” he continued. “So labor becomes an issue and the training, losing an employee costs a lot of money because of the amount of effort you put into training.”
April’s consumer price index (CPI) – a broad measure of how much everyday goods like gasoline, groceries and rent cost – indicated that year-over-year prices for beef climbed 7%, vegetables up 2.3%, sugar increased 4.3%, while seafood, cheese and eggs were down by single-digit percentages.
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What’s more, food-based companies like Dine Brands (Applebee’s, IHOP) and The One Group Hospitality (STK Steakhouse, KONA Grill) saw share prices dip this week, while BJ’s, Cheesecake Factory and Darden Restaurants rose slightly.
Celebrity chef David Burked put the onus on labor costs as the “No. 1 problem” for the restaurant industry today. (Fox News)
Job growth also sputtered in April, with the hospitality industry pulling back on hiring. Chef Burke pointed out how the restaurant business is not for the weak.
“The restaurant industry has this sexy appeal to it until you get in it,” he said. “Then you get in it, you realize this isn’t like TV. It’s hard work. You’re on your feet a lot. It’s demanding. It’s also very joyous. And, there’s a lot of satisfaction if you happen to like what you do.”
Dine Brands CEO John Peyton explains how the company has succeeded despite inflationary pressures squeezing diners at popular restaurants like Applebee’s and IHOP.
But, Burke expanded that “the minimum wage has continued to climb in different cities, especially for waiters or cooks. We don’t have a lot of minimum wage workers, maybe a couple of dishwashers. Most cooks we employ above that anyway. But wages and benefits and the spread of hours and PTO, it all adds up.”
According to the cook and restaurateur, food supply costs often fluctuate and have become a hidden rising cost, as most budget attention goes towards proteins like beef, poultry and pork.
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“Fish prices have come down a little bit, but the meat prices are still high. Egg prices surprisingly dropped a little bit, but dairy is still high, milk and butter prices are high,” he listed. “And some of the things we don’t really pay attention to, like cooking oil and condiments and seasonings and herbs and produce, they sneak up on you.”
“It’s the vegetables and fruits and things that we don’t really cost out per pound,” Chef Burke added. “And that catches up with us because lemons are up, produce is up, lettuce is up, onions have doubled. Those little things sneak up on us because we use a lot of them.”
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