Wondering What Happened to the Bread
Most restaurants offer us some bread before the meal arrives. In a basket or placed individually on our small plates, the bread is an automatic part of the dining experience. In the past we were not asked if we want to order (and pay for) the bread.
But the future could be different…
Rising Restaurant Costs
In a recent article, WSJ described the ballooning expenses of Judy Henry’s 120-seat Mediterranean restaurant in Reading, Pennsylvania.
The owner told reporters that while she employed approximately 11 fewer employees, her labor costs went up 20 percent. Whereas pre-pandemic labor had been 34 percent of her revenue, now it’s 43 percent. As a result, she stopped serving lunch, eliminated labor-intensive spring rolls from the menu, and has a floor manager only on Fridays and Saturdays. Otherwise, she answers the phone, greets and seats customers, and still is the sauté chef.
For similar reasons, she tweaked her menu. Diners will now pay $2 more for their filet mignon, her lobster and pasta dish went up 10 percent, and she no longer serves crab cakes. In addition, she replaced pork chops with pork tenderloin and her scallop pasta switched to shrimp.
With the price of a pound of crab meat more than doubling from $22 to $50, and vegetable oil and yellow onion having similar price increases, restaurants are struggling to keep food costs at 33 percent of revenue–the “magic” ratio:
Our Bottom Line: Factors of Production
Putting on our economic glasses, we can see that two of Judy Henry’s three factors of production are more expensive. Composed of land, labor, and capital, the factors of production create all goods and services. When we look back at her pre-pandemic labor, we see the 20 percent increase. For capital, it’s the food. Ranging from vegetable oil to crab meat, again, the pop in prices is substantial.
However, what might be most noticeable is the missing bread. Now at $1.50, a loaf of Judy’s legendary rosemary focaccia bread is no longer free.
My sources and more: A WSJ article started me thinking about the impact of inflation on a small restaurant. It had all the facts. However, if you would like to see more about bread and why French baguette prices (or instead brioche) could rise from their current €1 to €1.20 range, do look at this NY Times article.
Originally published at https://econlife.com on December 24, 2021.