Cost Pressure in the Hospitality Industry: A Balancing Act Between Inflation and Stability

In the restaurant industry, pricing remains on the agenda of executives attempting to keep their costs in check due to ongoing inflation. One area that remains particularly challenging is the beef sector. Michael Osanloo, CEO of Portillo's, described beef as the "most challenging factor" in the company's supply chain, as it accounts for 30% to 35% of raw material purchases. Although the team is attempting to reduce costs through pre-purchasing and has implemented a freezing program, a moderate increase in raw material prices is still expected for the fiscal year 2024. Meanwhile, other companies, such as Shake Shack, assume that price increases in their supply chain will remain in the low single-digit range. However, Rob Lynch, CEO of Shake Shack, emphasizes that beef continues to constitute one-third of production costs, although the dependence on chicken is lower compared to other fast-casual chains. Meanwhile, the return of avian flu leads to noticeable price fluctuations in eggs and poultry. Nationwide egg prices reached a high level in December, primarily affecting companies like Denny's, which offer a variety of egg dishes. CEO Kelli Valade is attempting to stabilize costs through forward-thinking price fixing. For the year 2025, the U.S. Department of Agriculture expects beef production to decline to 25.6 billion pounds. In connection with this, Potbelly CEO Bob Wright is analyzing the situation after the last wave of avian flu had already led to higher prices for turkey. Dutch Bros and Cracker Barrel are also closely monitoring price trends for dairy products, sugar, and coffee. Cracker Barrel was already able to record a cost increase of 2% to 3% for the first quarter of 2025. Despite the challenges, the industry remains well-positioned, with strategic foresight and smart cost control being crucial to ensuring relative stability in times of volatile raw material prices.