Effects of Rising Cooking Oil Prices (And Other Input Costs) On The Restaurant Industry

Point of Sale, Restaurant, Restaurant Profitability

Cooking oil prices have been rising. Is your restaurant ready to handle the effect this will have on your profits and operating costs?

Cooking oil is one of the must-have supplies that almost every restaurant needs in order to operate.

Unfortunately, cooking oil prices have been soaring lately, and the cost hikes have far outpaced “normal” inflation of other products.

There are several reasons for this, and there’s no reason to believe the expense is going to come back down anytime soon.

Dramatic price increases in a basic supply item have the potential to affect every aspect of the restaurant business, and some of them might come as a surprise.

Why Are Cooking Oil Prices Rising?

Rising prices for cooking oil are the result of an (im)perfect storm of overseas events and domestic issues.

Against a background of 9%+ inflation, practically every product is costing more now. Cooking oil prices are rising faster than this, however, as are many of the other commodities restaurants depend on to survive.

The war in Ukraine has played a role in this, since the Black Sea countries used to be the world’s leading exporters of sunflower and other cooking oils.

Losses here have triggered export restrictions elsewhere, leading to a global supply crunch and rising prices.

Will Prices Come Down Soon?

Unfortunately, there’s no reason to believe either inflation or the war will come under control soon. This means that cooking oil prices may be high for a long time.

It falls to restaurant owners to manage this on their own.

How Does This Affect Restaurants?

A hike in cooking oil prices affects more than just cooking oil.

Every dish on your menu that uses oil either has to become more expensive, which reduces sales, or operate with a thinner profit margin.

Given the thin margins most restaurants operate on already, neither of these are attractive options. You’re also likely to notice unexpected shortages of oil, as other consumers are likely to grab all that they can when they find a sale or bulk discount.

You might also notice increases in other inventory you’ve thought of as an input, but which use cooking oil in their production.

Various kinds of cooking oil find their way into bio-fuels, soap and animal feed. This means even a marginal increase can mean higher prices for delivered goods (which use gasoline), cleaning supplies (especially soap and degreaser) and meat.

The meat issue is especially hard to move away from, since beef, pork and chicken are all likely to include the now more-expensive feed in their production.

Ways to Manage the Crisis

Regardless of the causes and effects of the recent cooking oil prices your restaurant has to manage somehow.

As a rule, you can get a lot done by opening up to your customers and inserting a notice in the menu that prices have had to go up somewhat as a result of the cooking oil price increase and other factors.

You can also re-evaluate how cooking oil gets wasted in your kitchen and take steps to conserve what you have.

Another point you might consider is taking a small reduction in the margin on cooking oil-intensive dishes you offer, while making it up somewhere else, such as a more efficient POS system for running your business.

Dealing with any cost increase is challenging for restaurants.

Don’t put off dealing with the effects of rising cooking oil prices, contact us now for more info on our Point of Sale and Stock Control for your restaurant.