ArrowStream Foodservice Blog

Restaurants Battle Rising Labor Costs

Posted by Kate Hubbard on Oct 10, 2019 6:24:00 PM

Despite some recent slowing in restaurant sales, growth in 2019 for the industry as a whole has been good. However, rising labor costs continue to be a major concern for the industry.

David Maloni, ArrowStream economist, noted that, "the cost of hourly labor for the industry has risen annually somewhere near 7 percent for the last five years or so. And the last three years this has outpaced sales growth, causing the cost of labor as a percentage of sales to rise despite record menu price increases. Even more so than food, labor costs are difficult to combat. But make no mistake, the industry is doing so by adopting technology for their operations and supply chains."

U.S. foodservice and drinking establishments labor cost of sales

Using Supply Chain Technology to Combat Growing Labor Costs

opRising labor costs aren’t only a concern for restaurant operators, they’re also a concern for the restaurant industry’s supply chain. Food manufacturing wages have been on the rise as well, climbing an average of 3 percent annually during the last five years.

The chart below shows that wholesale food price inflation has not helped much to offset the rising labor costs. Thus, the building importance of technology in the foodservice supply chain.

Rising labor costs pinching the foodservice supply chain

ArrowStream's supply chain technology can be instrumental as part of a strategy to offset the rise of labor costs. By using our platform, restaurant chain operators can reduce overall food spend, identify price discrepancies, consolidate suppliers or identify new partners for cost savings, anticipate food prices from market changes, and recover credits from quality issues

 

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