What is lunchflation and what does it mean for your restaurant

Restaurants are having a hard time because of inflation, people’s decreasing ability to buy things, the rising cost of ingredients, and the press. When combined with the harshness of lockdown and a forced cooking course, it can be a fatal blow if the business owner doesn’t know how to deal with it.  

The end of the year 2022 has brought inflation levels unseen for a long time before. Oil and food prices have gone up because of the ongoing war between Russia and Ukraine. This has caused the rate to reach double digits in almost half of the world. High rates are seen in both highly developed countries in Western Europe (10.4% in Germany, 10.9% in Sweden, or 11.1% in the UK) and developing countries (18.8% in Kazakhstan, 12.8% in Peru, or 13% in Senegal). 

These raw numbers reflect rising costs and real changes in the day-to-day habits of millions of people around the world, who need to do their chores, go to work, and survive until the next morning regardless of the ongoing situation. 

In developed countries, where high inflation levels have been unheard of for decades, the situation is a game changer in many ways. When put together with a world after a pandemic where people go back to work and try to get back to their old habits, new things start to happen. 

Lunchflation is one of them. 

What is lunchflation

Lunchflation is when the price of a lunch eaten at the office, whether it’s an ordered lunch, a wrap, a burger, or something else, goes up so much that it becomes a burden. Sometimes it can rise so much that one is unable to buy it anymore. 

CNN reports that out-of-home food prices have increased by 7.2% over the last year. Food prices rose by 9.4%, and grocery store prices rose by 10.8%. The inflation is seen in nearly every aspect of eating out—from a morning donut with a coffee to a lunchtime wrap and salad. 

Lunchflation is a real thing and affects the budgets of thousands of employees all around the world. Yet it is not only a one-sided problem. Inflation is not pumping up the profit margins of business owners.

Facts about prices

The rising prices have not come from nowhere. The restaurant owners face a dramatic increase in nearly all costs. These start with media and maintenance costs to pay, personnel wages, and ingredient costs. According to the US Energy Information Administration, 2022 will be the first year since 2013 with gas prices above $3 per gallon (3.78 liters).

Gas and media costs are affecting everyone, and the prices of groceries and out-of-home meals are rising. According to data from Supermarket News, restaurant food is still 3,4 times more expensive than food made at home. 

Last but not least, 20% of the US workforce currently works from home. This sets aside 62.5% of all food dollars to be spent on home food, with the remaining 37.5% to be spent on out-of-home food. 

This is bad news for restaurants of all kinds, meaning that consumers have neither money nor a need to buy food at restaurants. Yet it doesn’t mean that the companies are completely defenseless against this trend. 

What restaurant can do to tackle the lunchflation

Lunchflation comes from a mutually reinforcing problem of increasing prices that reduces the users’ motivation to buy their lunch in restaurants. This leads to a simple conclusion: cut costs wherever possible to avoid increasing the prices. The easiest ways include:

Automation

The restaurant business appears to be challenging to automate. It can be true, yet usually the greatest potential to reduce manual labor is not in the food-related part of the business but rather in the back office. There are multiple business processes that can be easily automated, including: 

• Human resources and payroll operations
• Accounting
• Analytics and business intelligence 
• Order processing and queuing

All of these processes can be automated using dedicated Software as a Service (SaaS) tools. Also, many of these tools can be interconnected using an application programming interface (API), so the data can be shared with little to no human intervention. For example, the information about hours worked by a particular employee can be exported to the HR system, later used in the accounting platform to count the compensation, and finally taken into account by the business intelligence system.

According to Kissflow data, up to 48% of businesses are using automation solutions. Also, up to 50% of businesses plan to automate more tasks that are done over and over again.   

Provide online ordering using its own channel, comes with little to no cost of human customer service and no employee time consumed on processing the order. The time saved in this particular order processing can be invested elsewhere. For example, another order can be processed then or the employee may engage in other activities like keeping the restaurant clean. 

When considering the restaurant as a whole, online ordering serves as both a profit booster and a cost-cutting mechanism. 

Also, online ordering is a speeding wagon one needs to jump into. The value of the online ordering market is expected to skyrocket to $220 billion by 2023, which will make up 40% of all sales in restaurants. Also, up to 64% of customers are more willing to place a digital order than a traditional one when it comes to dealing with QSR restaurants. 

Use big data to find savings 

With modern technology, we can collect data and use it in ways that have never been done before. In the hands of a skilled analyst, all the business data can be transformed into a comprehensive guide to making a company more resilient and cost-efficient. 

A sophisticated system like Ordering Stack can harvest all data points and deliver them as easy-to-process sets that can be later fed to either human analysts   or an intelligent combination of both.

Look for alternatives

Even though this is frequently the case, the search for alternatives in the restaurant industry does not have to be about lowering quality. For the restaurant owner who wishes to find savings without sacrificing quality, the answer can be found by looking for vendors who offer bigger bundles and do not require transporting goods over greater distances. 

Surprisingly efficient savings can be found by slightly decreasing the temperature in the locale by 1 degree and installing the aerators in taps or LED-based lighting systems. According to the EU data, turning the thermostat by 1 degree lower would save up to 7% of energy. The same goes for air conditioning, with setting the temperature 1 degree higher can save up to 10% of the energy used. 

If possible, looking for more efficient kitchen appliances can deliver significant savings, especially considering the rising price of energy. 

Summary

Lunchflation is far from being another buzzword; it is a serious threat to the established way of doing HoReCa business. Yet companies can apply the techniques enumerated above to tackle this challenge and reforge the threat into assets. 

In the end, every restaurant around suffers from this effect, and managing it properly makes one stand out from the crowd.