These are the 3 most expensive ingredients for restaurants: CEO

The price of food and dining out rose once again in September. According to the latest Consumer Price Index data, food prices rose 2.3% from a year ago, while the cost of dining out rose 3.9%.

Brian Will, Will Restaurants Investment Group founder and CEO, joins Morning Brief to discuss how inflation is weighing both consumers and restaurants.

"It's been a dramatic shift from what we call pre-COVID to post-COVID. Now, whether that's political or whether it was just the economy, we have seen prices jump astronomically in the last three years. Everything from rent and utilities to maintenance to food costs to labor costs. Everything is just skyrocketing. And it's driven our wholesale costs up to the point where we can only raise our prices so much before people stop coming in," Will tells Yahoo Finance.

He notes that Will Restaurants, along with many other restaurants, have increased their prices over the last two years. However, revenues continue to drop despite the price increases.

"We've unfortunately, in my opinion, have come to a point in the pricing scheme where we can't raise them much more. You know, we jokingly say that our bacon, lettuce, tomato sandwich now is $16. That's expensive for a bacon, lettuce, tomato sandwich. But when you figure all the costs in, we don't make that much profit on that $16 because we have so much overhead that has to get covered. So I think the economy is going to have to catch up with us a little bit before we're going to be able to do any more price increases," he adds.

While dealing with higher operating costs and the volatility of food prices, many restaurants have implemented staff cuts in an effort to keep their balance sheets in check.

Will adds that meats have become the most costly ingredient for his business, noting that ground beef, chicken, and fish are among the most expensive in the category. He also explains that the price of cheese has also increased.

To watch more expert insights and analysis on the latest market action, check out more Morning Brief here.

This post was written by Melanie Riehl

Video transcript

The price of food and dining out rising.

Once again in September, food prices up 2.3 percent from a year ago.

Now, one of the products in the biggest jump, that's the price of eggs.

The cost of eggs up 8.4% in the month of September.

That's on a easily adjusted basis.

That other number that you're seeing on your screen, it was up 39.6% from a year ago on an unadjusted basis here with the fact of higher prices on the restaurant industry we wanna bring in Brian Will, he's the founder and CEO of Will Restaurants Investment Group and will.

It's great to have you here this morning.

Thanks so much for taking the time to speak with us.

So we, we, we thought you'd be a great person to get your perspective here.

You've been in the restaurant industry now for 14 years.

Just give us a sense of how problematic or how challenging higher inflation continues to be for your business.

You know, Shana.

And by the way, thanks for having me on the show this morning, it's been a, a dramatic shift from what we call pre COVID to post COVID.

Now, whether that's political or whether it was just the economy, we have seen prices jump astronomically in the last three years.

Everything from rent and utilities to maintenance, to, to food cost, to labor costs, everything is just skyrocketing and it's driven, it's driven our wholesale costs up to the point where we can only raise our prices so much before people stop coming in.

So while we've had price increases over the last two years of about 25% we've actually seen our ticket sales or our, our revenues go down at the same time.

It's been an interesting, uh, thing to watch.

Yeah.

Well, it makes me appreciate the Bodega that's kept the prices the same for me, uh, over the past several months here at this juncture.

So all these things considered, when you think about that, that passing on of the price to consumers, how many times have you had to do that?

We've done three price increases in the last two years, we did a 10% a 10% and a 5%.

And even with that 25% increase, you know, our revenues have dropped about 11% over that period of time.

So it's, it's been interesting to watch.

Well, when it comes to how you are continuing then to make those adjustments, obviously, higher prices, you've been forced to raise, uh, your menu prices a couple of times, I believe three times are are you gonna be forced to raise it again?

You know, we've, unfortunately, in my opinion, have come to a point in the pricing scheme where we can't raise them much more.

You know, we jokingly say that our, our bacon lettuce tomato sandwich now is $16.

That's expensive for a bacon lettuce tomato sandwich.

But when you figure all the cost in, we don't make that much profit on that $16 because we have so much overhead that has to get covered.

So, yeah, we, I I think the economy is gonna have to catch up with us a little bit before we're going to be able to do any more price increases.

In the meantime, we've done things like lower labor costs by cutting staff having people do more things than they used to do um to try to get our overall wholesale prices down or under what we're charging so that we can keep our profit margins back up and, and where have you had to change suppliers that you work with as well?

You know, we do a cost plus it's like a cost plus 6 to 10 on everything that we buy from our suppliers.

And in our industry, there's really three big suppliers.

So you're constantly shopping, those suppliers uh trying to find the best prices.

Um But because of that cost, plus we work on what's called a dynamic pricing.

So our pricing can change literally week to week.

In fact, I, I've seen months where chicken has gone up 100% and then back down 100% the month after that.

And unfortunately, in the restaurant business, you can't just reprint menus every week to adjust for pricing.

So we end up eating a lot of the volatility in the price of, uh, our food, um, which sometimes is good and sometimes is bad.

What, what is the most costly ingredient or item that's on the menu?

Where, where you're just having to, to eat that cost our staple products are gonna be ground beef chicken and then fish.

We sell a lot of salmon.

So those are our three most expensive items.

I mean, there are items like cheese, which is very expensive, but those are our staple items that we sell the most of.

And those are the costs that get us most of the time.

Brian.

Give us a better sense of the traffic that you're seeing.

We've talked so much about the fact that consumers are under pressure.

Maybe they're not actually going out and dining as much as they once were inside restaurants.

Is that something that you're seeing at your business?

Yeah, you look at revenues in the past three years we went from, I'll give you one restaurant.

We've got four, the one restaurant that's closest to me went from 2.7 million to 2.5 million to 2.2 million in the last three years.

So, that's a half a million dollar drop in gross revenues on one location while your costs have gone up 20 25% between labor and food.

All right.

Will restaurants, Investment Group founder and Ceo Brian.

Will Brian.

Thanks so much for taking the time describing what you're seeing in your business.

Thanks Brent.