Even in the best of times restaurants are the hardest business to run successfully. These are not the best of times, and (as always) it isn't clear what the future will hold.
Actually, to spend $50K on a fryer system is pretty hard:
https://www.webstaurantstore.com/63853/deep-fryer-with-oil-f...
Fried food's on the menu, boys! Quadruple bypass, here I come.
I assume "closing down the restaurant and retiring" means they will sell the restaurant (or at least the property), but I am not sure to be honest?
If they want to retire anyways, then good for them. But a lot of businesses have had to raise prices this year, including grocers, which are arguably restaurants only competition. I think folks would understand.
There was a local beer taproom/bottle shop that I frequented a lot for years. Even as craft beer became more prominent and there were more local options, I liked it enough to keep going, but fundamentally there came a point where they raised their prices enough that I started going elsewhere, and once I broke that habit there was never a big reason to go back unless I was meeting someone else there once in a while.
In this case, "enough" was in the 20% range, but given what's happened to food prices lately I don't think 5-10% is a realistic number for a restaraunt either.
Agreed in general terms, but who is going to buy a business that cant even cover its costs? It sounds like this business has a negative expected value without raising prices.
That may be true, but you mentioned they're in the midwest. So am I. I'm in the heavy hitter, Chicago, but I'm from Smalltown, Midwest. I can say that NOTHING is free. Everything is a trade off. All those years of low taxes? Yeah, no one has any money in the midwest. Raising prices may well run people off. They already got the reduced-risk benefit of the midwest for decades, ability to own the building, lower taxes. Having a poorer local clientele was the price for those securities. That was part of the trade off.
You aren't just flat out "getting a better deal" as they probably felt, doing business in the midwest vs coasts. It is absolutely not outright just a "better place to do business". Other than perhaps our environmental stability (the greenhouse effect matters less, no fires, abundant fresh water, no fault lines outside of the St. Louis locale, etc.), those things are starting to matter in a big way, but are of limited benefit to a restaurant.
They already took the benefits from this area. All comes out in the end, but generally the midwest grants you more stability/security, while you end up poorer at retirement than someone that earned more dollars on the coasts. Same end result for them, just like the rest of us.
You might look at this and say charging $4 for X item is already at the edge of reasonable, but when your neighboring restaurants are already at $6 to $8 there is little reason to offer screaming deals. Its just a sign that its time to reprice to $7 to $8 for your own offerings, providing more profit to interest the dual owners moving forward. Reducing hours would also be a good idea for a owner operated business like this!
In addition, type of food matters a lot. A place that sells 'cheap slop on a plate' has lot less price flexibility than a boutique that sells fancy sushi.
I could get a "burek" (pastry with cheese) for 2eur, it's cheap, it fills you up, and you continue with your day.
Or I could order a pizza delivery... pizza used to be in the 6-8eur range if you lived near the restaurant, so for 12, 13 eur I could get two pizzas delivered to my home.
Then "the plague" came, the local pizzeria was closed, delivery was taken over by "app companies" (wolt here), they charge percentages of the food price + delivery cost, so the price of the pizza has gone up to 9-10eur (to cover the wolt fee), and with the delivery fee, we're talking 20-22eur for two pizzas. After the reopenings, the prices in the restaurant are the same as on wolt + with drinks, we're talking close to 30eur for two pizzas and drink.
If bureks cost 2.5eur or even 3eur (50% higher), they're still "cheap", and people will buy them. With pizza going from 12, 14eur to 20-25eur, I can make a huge amount of very good food at home, and saving 15eur to eat healthier makes it worth it.
TLDR: at some price point (that I currently feel we're at now, with some foods atleast here), it isn't worth it anymore to eat out. Everybody might rise their prices, but less people will eat outside, lowering the overall profits of everyone.
This is why hard-enforced industry standards are a good. The situation you describe only exists when the price increase happens for 1 single restaurant and the others stay the same.
However many exist in the region, as long as there's no mandatory system, they're just gonna wait it out, see who gives up first, people stop going there and go other places instead, thus increasing traffic and income without having to raise prices.
This race to the bottom will be won by those who are already the richest and can weather the financial storm the best.
It's a system by which those at the top of the rungs actively prevent anyone from passing them through hard work.
It has happened to my own fees, and I still should raise them (so I totally understand the fear behind it).
Plus, the United States has significant inflation now, which you aren't used to, but in other countries it's TOTALLY NORMAL to raise prices every year.
$9 or $9.50 for a beer is the most you can charge in some places. You'll suddenly put people off if the beer is $10.
What you can do is charge $9 for a 14 oz beer (previously 16 oz), which is roughly like charging $10.28. Can only do that trick once, though. Or you can increase the size to 24 oz and charge $14.
Not in Minnesota, obviously.
https://en.wikipedia.org/wiki/State_income_tax#/media/File:T...
Sounds good.
They are still worried about the long term health of the business because of enternal cost increases (food, supplies, etc.), and are honestly thinking of just shutting down their restaurant and retiring rather than raising prices. They honestly think that if they raise their prices to get the same profit (NOT increase, just to keep it the same!) they have been getting, no one will come anymore because the cost is too much.
They by comparision to a lot of other business are lucky! They don't have to worry about rent at all, and they only have themselves to pay. Both also have other external sources of income (their spouses works), and have absolutely zero debt.
I can't imagine how it is for business that have rent (and possibly rent backpay) and employees they need to pay. I went to Northern VA (Reston) before and after COVID....so see almost all of the local restaurants and a great local grocery store wiped out because the property management were so unforgiving for rent.