Local Restaurants Handle Inflation Differently

Inflation is absolutely everywhere. It's changing the way we celebrate holidays, how we grocery shop, and even our snacks. We've all had to make adjustments to combat inflation, and local restaurants are no exception to this.

Both larger chain restaurants and smaller restaurants have had to deal with inflation using their own unique strengths, explains CNBC. Although national chain restaurants have more resources to help soften the hits, small businesses have their own unique strategies.

Aaron Allen, founder and CEO of restaurant consultancy Aaron Allen & Associates, told CNBC that chain restaurants like McDonald's and Starbucks have the advantages of larger budgets, broader scale, and more advanced technology when it comes to dealing with inflation. These chains also have the advantage of being able to negotiate prices with suppliers.

When it comes to ingredients like potatoes (crucial to the staple french fries side offering at most chains), national fast food restaurants have more bargaining power than your local diner. Because chain restaurants will place larger orders than local businesses, suppliers will prioritize their business over others. Unfortunately, independent restaurants do not have that kind of buying power.

However, what local restaurants lack in scale some are able to make up for in adaptability. Independent restaurants have the advantage of being able to recognize rising ingredient prices and quickly pivot their menu to work around this challenge. Local restaurants can often adjust menu prices or change offerings more quickly than larger chains that have to go through a number of approvals and internal processes before small tweaks can be implemented across locations.

Customers also tend to be more understanding of small businesses changing prices than when fast food chains do the same. Per a study from PYMNTS.com, 35.9% of consumers say daily prices matter when they choose a chain restaurant, but only 22.5% said those prices matter when it comes to independent restaurants.

So, if your favorite Sunday lunch special is no longer as affordably priced as you remember, keep in mind that your grocery budget isn't the only one being hit by inflation. Nowadays, we all have to be a little more flexible when it comes to how we stretch our dollars. As a consumer, we might turn our holiday celebrations into a potluck or choose to order takeout. For local restaurants, a little menu adjustment can be the best option to keep business going.