Smashburger warns on inflation: ‘There’s a point where people won’t pay’


imageWith consumer prices soaring by the most in four decades in January , food prices have borne the brunt of skyrocketing inflation — something Smashburger and other food chains have passed along to their customers.

In a Yahoo Finance interview, Smashburger president Carl Bachmann cited inflation as “a challenge” for the fast-casual chain, but noted several strategies that have helped alleviate price pressures — and sticker shock for consumers.

“We’ve had to take some very small minor price increases, but we were very strategic about that.The key thing here is really focusing on your supply chain, and making sure that you’re managing freight costs, and all of those little pieces of the puzzle behind the scenes to counteract the commodities as they continue to rise,” he said.

Costs for basic food items like chicken, ground beef, and cream cheese have seen significant upswings since the start of the pandemic, rising 3.4% on an annual basis in 2020, and 3.9% in 2021 — a significant gain compared to 2019’s 1.9% rise, according to the Consumer Price Index.

Bachmann explained that Smashburger has utilized redundant vendors and global partners to ease supply chain constraints which, in turn, has helped curb price strains.

“You’ve got to work harder at that in order to combat inflation, because there is a point where people won’t pay.We want to make sure that we keep our guests happy,” he continued.

So far, Bachmann said he’s seen “slow” improvements when it comes to the overall supply chain, but that staffing issues still persist — a common phenomenon that the restaurant space knows all too well.

“Once our supply chain has better staffing, they are paying less overtime, they’re not struggling for deliveries and I think that’s the key,” the executive said.He added that strength in the supply chain is “linear” and its impact can be felt all the way through frontline operations.

Story continues Since the latest decline in COVID-19 infections, Bachmann said Smashburger has seen a surge in foot traffic.He cited increased “pent-up demand” that only got better as Omicron infections waned, boosting in-dining experiences.

Yet, consistent growth has remained in delivery, a trend that Bachmann predicts is “here to stay,” as well as drive-through expansion.Those trends have been accelerated by the pandemic, and most food chains are leaning into them.

Value Perception vs.Price Point

Smashburger’s new Queens location (Courtesy: Smashburger) Despite a variety of challenges plaguing the industry, Bachmann stressed that the largest risk is neither labor, inflation nor the supply chain — but quality of taste.

“Fast casual operators don’t realize how important food quality taste is — vibrant flavors, really making your product line exciting for the consumer,” he told Yahoo Finance.

“I think people are more careful about where they buy, when they buy, and how they buy [but] if you’re going to demand a certain price point, you really have to deliver on bold, vibrant flavors, and really be innovative,” the executive explained.

Smashburger has leaned on digital transformations and third-party delivery companies to add to the overall customer experience — in addition to new menu offerings, like all-day breakfast at select locations and the Scorchin’ Hot Crispy Chicken Sandwich , which sold out at multiple locations in just a few weeks

“During the pandemic, a lot of restaurants shrunk down their menus and and took that as as a direction to save costs.

But we decided that was the time to really open up the doors and get exciting, vibrant, and bold flavors, and let people know that they’re really getting value.”

“It becomes a value perception piece more than a price point piece,” he continued.

Alexandra is a Producer & Entertainment Correspondent at Yahoo Finance.

Follow her on Twitter @alliecanal8193

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