Although food costs will likely moderate once supply bottlenecks are resolved, higher wages and labor shortages will persist even after pandemic relief has dried out, because people are yearning for greater work-life balance and flexibility in a post-Covid-19 world, the analyst wrote.
That will create “inflation that in our view is not transitory,” Saleh said.
Whether higher prices are here to stay or just a temporary blip amid a fast reopening of the economy is at the center of a hot debate in the U.S. Federal Reserve Chair Jerome Powell said at a Congress hearing Tuesday that price increases recently are larger than expected but reiterated that they will eventually wane.
While commodity prices such as lumber have come down, food costs have continued to surge. U.S. producer prices for processed poultry jumped to an all-time high in May.
Some chains are coming up with creative solutions to avoid raising prices.
Wingstop Inc., for one, is only planning its typical 1% to 2% menu price increase this year. To save costs, the company is now buying whole birds instead of cut-up legs and breasts, selling less-used thigh pieces from a new delivery and takeout brand.
“The big price increases—the 4% price increases you’re seeing other chains do, that won’t be us,” Chief Executive Officer Charlie Morrison said in an interview. “Large price increases that are promoted and then passed on to the consumer tend to have a negative reaction.”
For smaller businesses, there is often little choice.
In Atlanta, restaurateur Bill Goudey raised prices by as much as 5% on some items a few weeks ago, steeper than the 1% increase he’s more comfortable with. The last few months have been chaotic at his two Copeland’s of New Orleans franchises. Workers have been so scarce that customers have had to wait for a table for up to two hours some weekends.
“While we’re hopeful some of these are short term and supply chain related, many are longer term cost concerns that could take months to resolve,” Goudey said in an email.