Higher prices at restaurants ‘here to stay’: FAT Brands CEO

Andrew Wiederhorn says he has never seen restaurant operators roll back their prices

FAT Brands Inc. CEO Andrew Wiederhorn warned that higher prices at restaurants are "here to stay," noting that he has never seen operators roll back the increases once implemented. 

Wiederhorn stressed on Tuesday that inflation is "definitely not transitory" in the restaurant business

He made the comments on "Mornings with Maria" as consumer prices have surged at the fastest pace in nearly four decades in November with Americans paying more for practically everything from groceries to cars to gasoline.

The consumer price index rose 6.8% in November from a year ago, according to a Labor Department report released earlier this month, marking the fastest increase since June 1982, when inflation hit 7.1%. The CPI – which measures a bevy of goods ranging from gasoline and health care to groceries and rents – jumped 0.8% in the one-month period from October.

Price increases were widespread: Energy prices jumped 3.5% in November and are up 33.3% year over year. Gasoline is a stunning 58.1% higher than it was a year ago. Food prices have also climbed 6.1% higher over the year.

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Last week it was revealed that the producer price index increased 9.6% in November over the previous year and 0.8% on a monthly basis, according to the Bureau of Labor Statistics.

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Wiederhorn told host Maria Bartiromo that prices in his 2,300 restaurants have increased about 4 to 6% "and that’s really just so the operators can maintain their margin and can at least squeak out a profit." 

He stressed that the price increases are not going to come back down. 

"If they [restaurant operators] get a chance to have a slightly lower commodity cost or other costs, then they’re going to build back their margin," he told Bartiromo. 

Wiederhorn also noted that he doesn’t "see significant price increases further down the road in 2022." 

He warned that supply chain issues still exist, creating challenges. He noted that "it’s not so much about getting product available anymore," but "it’s just about the delay to get product" and "the delay for equipment." 

"We’ll open probably close to 100 restaurants in 2021 and 150 in 2022, but there’s a big delay in things like refrigerators, freezers, equipment like that, so that could push an operator back four to six months of getting open," Wiederhorn said on Tuesday. "So we’re seeing that problem." 

He also warned that labor shortages continue to present challenges for the restaurant industry. 

"We’re seeing some continued tightness of finding employees to staff restaurants at whatever the wage is, it doesn’t matter, it’s just hard to find them," Wiederhorn said, noting that it is especially challenging for new franchises. 

He pointed out that out of his 2,300 restaurants, only 100 are corporate stores and the rest are franchises. He also said that franchises opening a new restaurant can "borrow from their staff and move people around to get the restaurant open," but for those opening their first location finding employees has been "really tough." 

"You might hope to interview 10 people, you can only find three, and you’re lucky if someone is qualified," he said. 

The latest JOLTS report on job openings sits near a record 11.03 million while the number of people quitting their jobs fell slightly in October to 4.2 million, from 4.4 million in September, the third-highest number of monthly resignations on record. 

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"It’s just not even a function of the wage right now, whether you pay above minimum wage or not, it’s very hard to find workers in the [restaurant] category in some markets," Wiederhorn said, noting that the situation is not the same everywhere. 

"We’ve had ample labor supply in Texas and Florida, but California’s really tough," he said, adding that some eastern states are really tough to find labor as well. 

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FOX Business’ Megan Henney contributed to this report.