If it’s going to be different this time - Food and Labor inflation are going to be the driver of this bankruptcy cycle. Clearly, the trend in these costs is disconcerting, and there does not appear to be any relief in sight for the foreseeable future. In my mind, food or labor costs, alone, are not going to bankrupt any single company, but rather the risk lies in how a management team manages these inflation pressures. To date, inflation pressures have been partially sidestepped by raising prices. However, as I have seen over and over again, excessive pricing can kill a concept.
- As a result, I believe that restaurant analysts are going to increase their scrutiny of traffic trends as traffic is the primary indication of the health of a concept.