'Bar Rescue' host Jon Taffer on why dining out costs so much
Going out to eat was never a cheap proposition. But it's only getting worse.
A good steak for two at a local steakhouse may set you back $200. Add in two cocktails for $20 a pop, tax, and tip, and suddenly that's $350 drained from your Apple Pay account!
The brutal reality is that restaurants are passing on the much higher costs they are seeing onto diners. The alternative for restaurant operators is to go out of business.
"Now, here's a fact: Meat prices are ridiculously high right now, but a restaurant operates on about a 28% to 30% food cost. So that means for every dollar my cost goes up, I have to raise my price by $3. So if meat goes up $5, I have to raise my price by $15 for that item. So a lot of this is cost-driven," "Bar Rescue" creator/host and veteran hospitality executive Jon Taffer said on the Power Players with Brian Sozzi podcast (see video above; listen below).
"The industry's tough," Taffer added. "Labor's going to cost me 35% with benefits. Today my food cost is 30%. That's 65% of my operating costs right there. I haven't paid my rent, I haven't paid my electric, I haven't paid my uniform costs, all my other occupancy-related costs, etc. So if I do really well, I'm maybe earning about 10% to 12% in EBITDA … So when that steak goes up $5 to me, I cannot absorb that. I don't have the room. I must raise the price by $15. And unfortunately, you get nailed. But these are the economics that we deal with in the industry today."
Restaurant prices are up a staggering 25% since the early part of 2022, according to the latest Consumer Price Index (CPI) report. Over the past year, restaurant prices have increased about twice as fast as groceries, rising 3.5% compared to 1.8%.
As a result, Americans have chosen to eat out less. A new Gallup poll shows the share of adults who eat a meal at a restaurant at least once a week has dropped to a fresh low of 39%, down sharply from 53% in 2019.
One in five Americans now dines out less than monthly compared to one in 10 in 2019.
Taffer is speaking from decades of intense experience in all sorts of restaurant industry backdrops.
Taffer rose to fame through his no-nonsense, aggressive turnaround methodology seen on the long-running "Bar Rescue" television show, characterized by fiery confrontations, operational audits, and scientific approaches to bar dynamics and guest psychology.
Listen and subscribe to Power Players with Brian Sozzi on Apple Podcasts, Amazon Music, Spotify, YouTube, or wherever you find your favorite podcasts.
