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A $16 Dollar Cheeseburger?

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By Creative_studio @ Adobe Stock

Rising costs are pushing independent restaurants to the edge of viability in many areas. The outrageous prices restaurants must charge to cover their costs, like $16 cheeseburgers, are driving customers away. Heather Haddon reports in The Wall Street Journal:

A $16 bacon cheeseburger may not be enough to save your neighborhood bar and grill.

Independent restaurants are on financial life support, owners say, squeezed between escalating payroll costs and diners’ dwindling tolerance for ever-higher checks. Wages for waitstaff, table bussers and line cooks will grow more expensive for many eateries this year, with 22 states in January raising the minimum wage for hourly workers.

The industry’s economic strains can be seen on the appetizer plate at Chef Zorba’s Restaurant in Denver. Owner Karen LuKanic recently swapped Greek giant beans for homemade stuffed grape leaves to save money, and switched to cheaper shoestring potatoes from thick-cut fries. Denver has increased its minimum wage annually since 2020, most recently in January to $18.29 an hour, while Colorado has expanded paid sick leave and other employee benefit requirements.

“We are just keeping our head above water,” said LuKanic, who estimated about half her restaurant’s sales now go to payroll and other employee-related costs.

Chef Zorba’s charges $15.75 for a bacon cheeseburger, $5 more than in 2018. Even at those prices the 78-seat restaurant can’t turn a profit. LuKanic said she would consider closing if her Small Business Administration loan wasn’t guaranteed by her house.

American restaurants emerged from the Covid-19 pandemic to find their traditional economics no longer work. After struggling to stay afloat through lockdowns, restaurant operators endured surging food costs and supply chain shortages. Restaurateurs raised menu prices. In January, prices for food eaten away from home were up 30% compared with the same month in 2019, Labor Department data showed.

Restaurants’ food bills have stopped their pandemic-era surge. But payroll costs are still climbing.

Action Line: Inflation may be slowing down, but the damage is already done for retirees on a fixed income who don’t get a raise. Look at food prices in the chart below. Americans living in high-tax, high-cost blue blob cities are getting hit the hardest. Many are choosing to look for a better America in states where politicians don’t treat them like piggy banks and instead put their interests first, like Your Survival Guy’s 2024 Super States. Check out my latest Super States release, and click here to subscribe to my free monthly Survive & Thrive letter.

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E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West (RIP JB) and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com To sign up for my free monthly Survive & Thrive letter, click here.
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