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Restaurants feel squeeze of rising prices and labor shortages

Restaurants struggle with food costs, labor shortages
Restaurants struggle with food costs, labor s... 01:45

Warrenville, Illinois — Omelettes are among the mainstays at Nick Kostopoulos' Honey Milk restaurant outside of Chicago, but the rising prices required to make them — and nearly everything else on the menu — are becoming unsustainable. 

"Burgers are up about 40% from when we printed this," he said, looking at a menu. 

Two-thirds of restaurant operators said their total food costs are higher than they were before the pandemic, according to a National Restaurant Association Research Group survey of 2,500 operators. In April, wholesale prices increased for beef, pork and fruit for the fourth straight month. 

"Supply lines have been interrupted. Transport costs are through the roof," Kostopoulos said. 

Supply issues have also led to products being consistently out of stock at Kostopoulos' restaurant and his grocery store next door. 

"You're seeing a new trend is shrinkflation, where they believe that a customer can comfortably pay a certain amount of something. So they're getting smaller and smaller portions," he said. 

A labor shortage is adding to restaurants' pain. A record-high 48% of small business owners reported unfilled openings in May, according to the National Federation of Independent Business. Hudson Riehle, who represents the National Restaurant Association, called it a "double whammy." 

"Menu prices are up almost 4% compared to the prior period in 2020. That is the largest increase since essentially the 2009 timeframe," Riehle said. 

Kostopolous hasn't raised prices yet, but said he soon won't have a choice. "I'm scared that it's just the beginning," he said. "Whatever it is, we just have to keep adjusting." 

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