What Restaurant Companies are Saying About Commodity and Labor Inflation
I love to read all the of public restaurant company quarterly earnings call transcripts. What follows is the comments made on the last conference call of most of the publicly traded companies. Commodity inflation is running 10-25% and labor inflation is running 7-15%.
Commodity Inflation
FRGI
On a full year basis, we expect food and packaging cost increases in 2022, compared to 2021 of 15% to 20%.
DPZ
Based on the continuously evolving inflationary environment, we now expect the increase in the store food basket within our US system to range from 10% to 12% as compared to 2021 levels.
BLMN
Commodity inflation was up 15% in Q1,
As we indicated on our last earnings call, we expect both commodity and labor inflation to be higher in the first half of the year and should ease some in Q3 and Q4 of this year, as we lap elevated inflation from the back half of 2021.
DENN
We experienced commodity inflation of approximately 15% for the quarter
DIN
Regarding the cost of food ingredients at the restaurant level, we expect inflation of about 13% to 16% in 2022.
So we are seeing for the first half, Applebee’s probably expecting 22% inflation, and IHOP about 20% inflation for the first half. So that – and then it moderates somewhat in the second half.
EAT
driven by commodity inflation of 11% partially offset by menu price.
a situation that will maintain inflationary pressures longer than originally expected. We continue to believe that commodity markets will eventually moderate as the environment changes, likely as we move into calendar 23.
WING
despite coming out of a year with record inflation in 2021,
We find ourselves in a unique position in 2022, while most in our industry are facing inflationary headwinds and margin pressures, we anticipate significant deflation in our core commodity bone-in wings. While we will see some level of inflation in our business, we expect this will be more than offset by the deflation we are seeing in wings.
To provide some context, the spot market for wings hit a record $3.22 per pound in 2021. And as we sit here today, the spot market is at $1.64 per pound.
PZZA
Our current outlook for the food basket is for costs to be modestly higher in Q2, reflecting the full impact of March's, acceleration of inflation and rise 12% to 14% for the full year.
SHAK
We're living in an inflation environment where everything is up a little bit. The whole class this year should be up 10%, 15% than normal.
TXRH
With our current visibility, we are maintaining our full-year commodity inflation guidance of 12% to 14%. We continue to expect that year-over-year commodity inflation will moderate gradually as we move through the remaining three quarters of the year. But as we mentioned previously, even if inflation moderates, the underlying dollar costs for beef and other high use items will likely still be higher both year-over-year and sequentially.
RUTH
but it seems as you said back it seems like your basket inflation could moderate towards 10% as a ballpark year-on-year in the second quarter. Is there anything material I might be missing if you'd be willing to comment on that?
Cheryl Henry
So I think what I said was I think Q2 is still especially if you exclude beef, Q2 will be similar to Q1, which is about 19%. So I think we have one more quarter of higher inflation when you compare it to 2021. And then it will moderate, the degre
CHUY
Based on the current market condition, we expect our second quarter commodity inflation to increase to approximately 25% as compared to 2021
FWRG
As for that inflation, our market basket was up about 15% in the first quarter.
WEN
The year-over-year company restaurant margin decrease was driven primarily by higher-than-expected commodity inflation in the high-teens
TAST
Beef represents about 1/4 of our commodity basket, and its cost increased 31.9% in the quarter compared to the prior year period, although it held steady on a sequential basis. Domestic food and paper producers and distributors supplying most of our commodities are dealing with labor constraints and higher fuel costs themselves, which they are in turn passing on to us. As a result, commodity inflation overall was approximately 17% this past quarter compared to the prior year quarter, including the impact of higher beef costs. This was up from 16.2% in the fourth quarter. We believe that commodity inflation will remain elevated until the fourth quarter of this year.
DRI
We continue to see increasing cost pressure with inflation -- with total inflation of 7% this quarter, which was higher than our previous expectations.
Our commodity inflation this quarter was 11%.
with commodities inflation of approximately 9%
We started the year with 3% inflation assumption and pricing closer to 1.5%. And here we are, three quarters in, we're looking at 6% total inflation, and our pricing has only gone up by about 1.5%.
BJRI
Food cost inflation was in the high single digits as compared to Q1 of 2021, and up in the low single digits from last quarter. Food cost inflation has slowed modestly with certain meats coming down from their highs at last quarter, partially mitigating inflation on other inputs across our commodity baskets.
So, in terms of the commodity inflation, it’s similar to what we’re seeing right now. We’re seeing, versus last year, up kind of in the high single digits.
So, if we think about year-over-year inflation, we’ll see high single digits or we’re expecting high single digits for the next quarter. It should still be probably in the mid-single-digits maybe even slightly above that in the back half.
CMG
Question was on the commodity inflation backdrop and sorry if I missed it, but Jack, what was inflation on the basket in the first quarter?
Jack Hartung
Yes, it was in that like 12% to 13% range. Again it's the highest inflation I've ever seen.
CAKE
Next, for fiscal year 2022, we now expect commodity inflation of low to mid double-digits on an annual basis, which represents a 1% to 1.5% increase over our prior outlook based on what has happened in the marketplace as a result of the geopolitical turmoil.
And while current inflation in our industry is unprecedented
MCD
I mentioned that we thought commodities were going to be up roughly 8% or so for the U.S. That number is now more like 12% to 14% for the year.
JACK
primarily due to commodity inflation of 16.4% as well as unfavorable sales mix, partially offset by menu price increases. The inflation we have experienced is across all categories with the greatest impact seen in proteins, oils and tacos.
The inflation we are experiencing across the P&L is unprecedented and significant. We will continue to prudently look towards taking additional prices that means to mitigate impact on our bottom line.
Commodity inflation is now expected to be 12% to 14%, driven by inflation across the entire product basket. So that was up versus 10.5% in the first quarter.
Labor Inflation
PLTO
This increase was primarily driven by hourly rate increases. Rates were up approximately 13% versus Q1 of '21.
STKS
there's a lot of headwinds in both labor costs as well as on the opening lines
GTIM
Our hourly labor costs reflect increases in hourly wages, including the impact of the 6.1% increase in the minimum wage to $15.87 in the City in County of Denver
TXRH
while labor dollars per store week increased 17%. This increase in labor dollars per store week was driven by wage and other labor inflation of 10.5% and growth in hours of 7.3%.
WING
During the quarter, with the ongoing pandemic, we had elevated wages, higher overtime and training expenses to ensure our restaurants were properly staffed that impact the cost of labor, as well as enhanced COVID sick pay. The combination of these elevated labor expenses drove an additional 3.5 percentage points above our historical run rate.
EAT
On the cost side, we’re seeing labor pressure start to stabilize now that we’ve addressed our most critical staffing needs.
Labor expense, again as a percent of company sales was unfavorable 100 basis points compared to prior year, primarily driven by wage rate increases of 10% and the lapping of one-time favorability in the prior year due to close dining rooms and high wage rate states.
We also incurred elevated training and overtime costs of 60 to 70 basis points which we expect to work out of the model as turnover normalizes.
DENN
labor inflation of approximately 10%.
BLMN
We're seeing it internally, our inflation being up 10% in Q1.
DPZ
Looking at Q1 same-store sales, stores in the top 20% those that are essentially or close to fully staffed on average, outperformed stores in the bottom 20%, those that are facing the most significant labor shortages by 12 percentage points.
Labor costs have actually gone up significantly.
MCD
On the labor side, in the U.S., it's probably over 10% right now. Part of that is because you'll recall that we made adjustments to our wages in our company-owned restaurants mid-year last year, so we haven't lapped that. So part of it is due to that and part of it is due to just continued wage inflation.
CAKE
The labor market also continues to be dynamic with a lot of moving parts. Inclusive of known minimum wage increases, we're now modeling net total labor inflation of about 6% when factoring latest trends and wage rates, channel mix, as well as other components of labor.
CMG
Labor costs for the quarter were 26.3% an increase of about 140 basis points from last year. This increase was driven by our decision to increase average wages to $15 per hour in May of last year, which is partially offset by menu price increases. In Q2, we expect our labor cost to be in the mid 24% range due to leverage from our menu price increase as well as seasonally higher sales.
But obviously, in the last six months or so, labor units have really become a very topical subject for companies that didn't quite frankly, even mention them for years of discussion of covering some of these means, both in the retail and the restaurant side.
BJRI
On the labor side, it is sequentially still going up kind of more in the low single digits. So, that’s baked into the margin assumptions that we provided.
Greg Levin
No, it’s -- I don’t have this in front of me, but if I think if you go back to ‘19, hourly wages are up in the 20%, 25% range. And some of that is the fact that we’re in California, and California had a $1 step up every single year until this last year. So, we probably might have a higher labor quotient than maybe somebody else. But I want to say it’s in the 20%, 25% range if you compare to ‘19.
Tom Houdek
Yes. That’s fair. And in terms of hourly labor, we were in the mid-10s at the beginning of 2019, and now we’re in the 13 area. So, it’s yes, 25%-or-so just in terms of dollar per hour.
DRI
Hourly wage inflation during the quarter was just over 9%.
TAST
On the labor front, given the continuation of wage pressures that emerged last year, average hourly wages of our team members increased by 13.6% in the first quarter compared to the prior year period before overtime. However, this sequentially improved from the 14.2% increase we incurred during the fourth quarter last year. As we said back in February and are reiterating today, hiring pressures are stabilizing as we are seeing an increase in application flow while our turnover stats are starting to retreat from the peaks we saw in the back half of last year. More importantly, the average hourly rate we pay only increased about 1.5% from January through April of this year.
a lot of our labor increases have come from paying premium pay to some team members for acting as managers to open and close the restaurant. I think as the turnover on the manager side retreats a little bit, I think that's where we're going to save those costs that we pay to team members to open and close.
WEN
The year-over-year company restaurant margin decrease was driven primarily by higher-than-expected labor inflation in the mid-teens
CHUY
primarily due to hourly labor rate inflation of approximately 13% as comparable restaurants as well as an improvement in hourly staffing levels as compared to last year. With the lingering labor challenges, we expect hourly labor inflation to remain that elevated levels of approximately 10% to 12% for the second quarter of 2022 as compared to 2021, in addition to continuation of the year-over-year staffing increase.
JACK
Labor as a percentage of company-owned sales in the period was up 3.2% due largely to wage inflation of 14.2% compared to prior year as well, as the impact of our evolving markets.
We expect labor inflation to be 12% to 13% versus the prior year as we roll out targeted increases in late night pay to recover lost operating hours as well as selectively increased wage rates in key markets to attract and retain talent.