Inflation has cooled for both quick-service and full-service restaurants, study finds

Although restaurants across all categories have struggled with labor and supply-chain costs since the pandemic, restaurant-related inflation has actually declined significantly since its peak in April 2022, according to a recent restaurant report released by Square.

The point-of-sale system company released a quarterly restaurant report and noted that this quarter, inflation had dwindled to 4.3% for full-service restaurants and 3.6% for quick-service restaurants, as of September.

It’s no surprise that full-service restaurants have had less of a reprieve, given the category’s overall financial struggles. In fact, inflation has been on an upward trajectory for full-service restaurants since the beginning of the year, while conversely, inflation has been declining steadily within the quick-service category.

“Despite inflation easing, restaurants are continuing to face a number of challenges in their operations, whether it’s fluctuating food prices, employee retention, or ballooning payroll costs,” Ming Tai-Huh, head of food and beverage at Square, said in a statement. “Many restaurants are grappling with how to balance these increased expenses while still offering affordability to customers, and we’ve seen some restaurants leaning on automation and other time-saving technology to keep margins under control.”

Labor costs have also been fueling inflation trends for full-service restaurants. According to Square’s data, wages for full-service employees have increased 73.9%, as compared to 60.2% for quick-service restaurants over the past seven years.

“The cost of labor is growing faster than revenues in some segments, compressing margins in an already tight sector,” Ara Kharazian, Square research lead and principal developer of Square Payroll Index, said in a statement. “This trend will likely continue. Restaurants are hesitant to raise prices on consumers, but we remain in a pretty hot labor market, so wage increases will have to come from somewhere if restaurants want to remain competitive.”

Contact Joanna at [email protected]