Food Costs for Restaurants Went Down in 2016, but Labor Costs Jumped Higher

The rise in labor costs more than offset restaurants’ savings from cheaper commodities, according to BDO analysis.




With low unemployment, restaurants face more intense competition for employees, with some offering up to $14 an hour.

 

An analysis by the consulting firm BDO found food costs went down for publicly traded restaurants in 2016, but labor costs jumped in the same year, Nation’s Restaurant News reports.

As commodity prices tumbled after reaching record highs, restaurants saw their cost of sales fall 0.6% to 29.1% of revenues last year, BDO found. But labor as a percentage of sales increased 0.8% to 30.5% in 2016, more than offsetting the savings on commodities and driving up restaurants’ overall prime costs by 0.2%.

Dustin Minton, a partner with BDO, told NRN that restaurant owners have gotten better at managing their food costs because they’ve invested in useful technologies toward that end. But they’re also dealing with intense competition for employees, overtime requirements, health care costs and increases in the minimum wage in some states and cities. “Unemployment is so low, competition is fierce for people,” Minton told NRN.

Meanwhile, fast-casual chains saw the highest increase in costs—with their labor costs jumping 1.3% to 28.4% of sales—even as their same-store sales fell by 1.4% in 2016. But pizza chains, led by what NRN describes as “otherworldly performance” by Domino’s, are still going strong. Their average same-store sales increased 4.6% in 2016.

 

Edit Module

Tell us what you think at or email.

Edit Module
Edit ModuleShow Tags
Edit ModuleShow Tags

Related Articles

Doyle: Domino's Strong-Armed Facebook for Key Data in Company Turnaround

Chain's CEO says data analytics was crucial in transforming the company into a dominant force

Pizzeria Goes 100% Gluten Free

After 32 years, Randy’s Premier Pizza in Oakdale, MN, is removing all gluten.

Pizza Stalker or Computer Glitch?

More than 100 pizzas mysteriously delivered to a lawyer in Germany.

This 72-inch Cheese Pizza Costs $300

Mallie's Sports Grill & Bar attempts Guinness World Record for biggest delivery pizza.

Pink Flamingo in Paris Uses ONE Low-Cost Marketing Tactic

Pink Flamingo Pizza in Paris shines in the summer, giving out hot pink balloons that make customers easier to find on canal-side deliveries.

5 Useful Pizza Valentine Gifts

Gift them--or yourself--with a pizza-themed gift they will actually use.

5-Year-Old Spurs Change at International Pizza Chain

Handwritten letter to Pizza Express inspires the company to eliminate straws.

On a Quest to Eat Every Pizza Slice in New York

Dave Portnoy has been eating a slice nearly every day since June 2016.

Auburn University Club Celebrates Pizza

The club disbanded last fall with 250 registered members and is seeking a new president.

Does Chicago Love Pizza More than New York?

A new study of 15,000 people suggests Chicagoans love pizza the most.
Edit ModuleShow Tags
Edit ModuleShow Tags
Edit Module
Edit Module
Edit ModuleShow Tags
Edit ModuleShow Tags
Edit Module
Edit ModuleShow Tags
Edit ModuleShow Tags