Cost of living: Deliveroo partner restaurants have no choice but to raise prices

It could be make or break for many Australian restaurants, with new figures showing how much they will have to increase the cost of meals to just make ends meet.

Two-thirds of Australian restaurant owners have jacked up prices to counter rising meat and vegetable costs which have “significantly impacted” their bottom line, a new study shows.

A further four in 10 hospitality businesses reworked their menus to save money — and the same number shed staff.

The grim outlook is laid bare in the HospoVitality biannual survey by Deliveroo, which asked 10,000 restaurant owners across the country to evaluate how they were doing on a range of topics including staff, produce and business prospect.

The survey, carried out between May 23 to June 16, found the coming six months would be make or break for many, with significant outlays forecast.

Respondents cited rising produce prices (85 per cent), rents (75 per cent), staff salaries (75 per cent), and energy/fuel bills (67 per cent) as their greatest concerns.

Already this year, the survey showed 66 per cent of restaurants had hiked prices to counter increasing meat, vegetable and fruit costs.

HospoVitality survey respondents cited rising cost of fresh vegetables as contributing to their cost of living pressures.

More than 40 per cent (42 per cent) said they were now relying more on delivery platforms to get by.

The results are in line with SEC Newgate’s latest Mood of the Nation survey, which found 60 per cent of respondents listed cost of living as their number one issue, up from 29 per cent in March.

Restaurant and Catering Industry Association chief executive Belinda Clarke said the hospitality sector was already on a “knife’s edge due to the Covid-19 pandemic” and businesses were struggling with cost of goods and services increasing.

“The hospitality industry, which was already decimated by Covid-19, is facing further significant pressures in skyrocketing inflationary pressures, staff shortages and wafer-thin margins that are being wiped out,” she said.

“The inflationary cost pressures are forcing business to reduce opening hours, venue capacity and menu options.”

Amira's Indian Restaurant, in Sydney’s north west, is struggling to stay afloat because of rising cost of produce. Pictured here is the restaurant's tandoori chef Raj Kumar. Picture: Supplied

Sunny Arora, who owns Amira’s Indian Restaurant in Carlingford, in Sydney’s outer north west, said rising costs were nearly crippling his new business, which he started with the support of his head chef father in October last year.

“A lot of prices of produce have gone up and it is more difficult to get the produce. When you do find it, the price has more than doubled or tripled,” he said.

“Most of the stocks when we order from suppliers – they are out of stock.

“Capsicums were $20-25 a box and now they are $40-$45, up to $50. We use chicken thighs, which when we started were $9 a kilo, now $12 and $13/kg. Lamb was $14/kg, now $20. It bumps up a couple of dollars at a time.”

Mr Arora said he and his father had not paid themselves in months to keep the business afloat.

“We’re not bringing in enough profit to pay wages and rent. Now running behind on paying suppliers,” he said.

“We were doing about $2000 a week [profit], now we might be getting $200 to $300.”

Stick It Grill owner Chris Galatsianos says inflation is making business difficult. Picture: Supplied

Chris Galatsianos, who owns Stick It Grill in Collingwood, in Melbourne’s inner east, agreed the outlook was “bleak”.

He described feeling “deflated, burned out and unsure if he could keep the doors open”.

“The inflation effects following the pandemic have made us question whether or not it was worth starting a business at all,” he said.

“We were recently paying over $80 for a box of broccoli, compared to the usual $30 to $40.

“We can’t just pass on costs to customers, as the inflation impacts them too. We [are] finding customers are reducing the discretionary spending, especially on eating out.”

Deliveroo chief executive Ed McManus. Picture: Supplied

Deliveroo chief executive Ed McManus said the sentiment was common, with many restaurateurs having faced many set backs since the Covid pandemic started.

“[This year] there have been challenges around supply chains, partly resulting from inflation, which drives up cost of goods into restaurants, and then we’ve had the issues around lack of access to staff,” he said.

THE REAL RESTAURANT DEAL

To what extent, if at all, has your business been impacted by inflation in the last 12 months?
Significantly impacted: 62%
Somewhat impacted: 34%
Not impacted at all: 4%
Net. Impacted: 96%

What changes had you made as a result of inflation?
Increase our pricing: 66%
Offer more special promotions: 45%
Rely more on delivery platforms: 42%
Changes to menu: 40%
Reduce staff: 40%

What produce has significantly increased in price?  
Meat (excl. chicken): 34%
Fresh vegetables (excl. lettuce): 28%
Oil: 18%
Everything: 16%
Fresh Fruit: 13%

What are the most significant costs your are anticipating in the next 6-12 months?
Increased produce prices: 85%
Higher staff salaries: 75%
Increase in energy/fuel bills: 67%
Recruiting more staff: 57%
Increased rent: 55%

*Source: Deliveroo’s HospoVitality Survey for the period of May 23 to June 16. The survey was sent to 10,000 restaurants.

Originally published as Cost of living: Deliveroo partner restaurants have no choice but to raise prices