Inflation wallops Richmond restaurants, customers (2024)

Dining out in Richmond has drastically changed since the pandemic, driven by inflation and skyrocketing costs that are squeezing restaurants from every angle.

Judy Heretick of Mechanicsville used to enjoy dining out often with her husband in the Bellevue area of Richmond. However, rising prices have forced them to cut back.

“The biggest challenge for us is the cost. One or two years ago, it might have cost us $65 with drinks and a tip for a mid-level restaurant. Now, a $100 meal is the norm,” Heretick said. “We have definitely cut back on our dining out.”

Consumer inflation peaked in 2022 at 9.1% and has since come back down to 3.4%, but the average consumer is still experiencing higher costs everywhere from the grocery store to menu prices, to rent, gas and routine bills.

Restaurant menu prices have jumped a steep 24% since January 2020, according to a report from Bloomberg. Pre-pandemic, a $24 entrée now costs almost $30.

A survey by Global Strategy Group last fall found that half of the respondents could not afford to dine out.

Meanwhile, local independent restaurants are being crushed by rising costs for payroll and other expenses.

“It was already difficult to make good margins in restaurants pre-pandemic; now, it’s incredibly challenging just to survive,” said Joe Sparatta, owner of Heritage restaurant.

Rising food costs

Food costs have increased for restaurants, just as they have for the average consumer. According to the National Restaurant Association, 97% of restaurant operators report higher food costs in 2024. Grocery prices have risen 25% since the pandemic, according to the Federal Reserve.

“Most of our proteins have gone up 30-34%. That’s ribs, prime rib, brisket,” said Alex Graf, co-owner of ZZQ in Scott’s Addition. “We couldn’t raise our prices as much as the increases are. I don’t think the market can handle it.” As a result, ZZQ’s profits have declined.

It’s not just food costs that have increased; everything else has as well. “Everything is up, from food to maintenance to labor and equipment repair,” Graf said.

Even basic costs like gas have risen sharply, driving up the price of everything else. In April 2019, a gallon of gas cost $2.79; in April 2024, it was $3.61, a 29% increase.

“We’ve seen it historically with gas. Those prices don’t come back down. They set a new bottom for pricing,” Sparatta noted.

And it’s not just sit-down restaurants that are increasing prices. A recent study from FinanceBuzz found that McDonald’s was one of 13 fast-food chains that raised its menu prices by 60% in the last decade between 2014 and 2024. The personal finance site reported that a McDonald’s Quarter Pounder with Cheese meal from McDonald’s more than doubled in price from $5.39 in 2014 to $11.99 this year.

Other costs add up

With Richmond’s recent development boom, property taxes are skyrocketing for many local restaurants, especially in Scott’s Addition. ZZQ saw its property assessment rise from $533,000 in 2018 when it opened to a whopping $1.3 million in 2024, raising its monthly tax payment from an affordable $112 per month to a painful $867 per month.

“We’re being taxed as if ZZQ were a six-story apartment building,” Graf said.

Despite rising costs, independent restaurants are hesitant to pass these increases on to customers.

“If we passed all those hidden costs to our customers, our prices would be in the mid-$40s per entrée,” said Lee Gregory, co-owner of Southbound with Sparatta.

Labor costs have also surged. Before the pandemic, payroll costs for restaurants were typically 28-32% of sales. “Now, we’re closer to 38-39%,” said Liz Kincaid, co-owner of Tarrant’s, Bar Solita and And Dim Sum.

“We increased the hourly wage across the board about 20%. Everybody is now getting paid more,” Gregory said. “Before the pandemic, a dishwasher would be paid $14. I’ve heard some places now pay up to $20 per hour for dish shifts.”

Impact on diners

With costs rising across the board, fewer people are dining out. Visits to sit-down restaurants were down nearly 5% in late 2023, according to Placer.ai. A recent survey from the National Restaurant Association said restaurants were reporting more challenges with sales volume this year.

“These trends are indicative of how rising costs are pushing away guests from Virginia’s dining destinations,” said the Virginia Restaurant, Lodging and Travel Association in a statement.

A recent survey from Coresight Research, an analytics and research firm, found that 92% of respondents who dined out in the previous two weeks observed menu price increases.

From that survey, 57.7% indicated they have changed or expect to change their dining-out habits by cooking more meals at home.

“We can say that middle class simply cannot afford to eat out anymore, at least not as frequently as before,” said Sujeet Naik, a Coresight Research expert.

“With menu prices climbing and budgets tightening, discretionary spending such as on dining out is dwindling. Post-pandemic high inflation has chipped away at household finances, stretching budgets thin across essentials like rent and health care. As a result, dining out, much like entertainment, becomes an obvious target for budget cuts when households need to redirect a greater portion of funds to cover necessities,” Naik said.

Many diners are sticking to tried-and-true restaurants to avoid unexpected high bills. Richmond diners also face a 13.5% tax on meals, further discouraging dining out.

Some local restaurants have increased menu prices or added fees to defray costs. Others, like Kincaid’s, have streamlined menus to reduce labor needs. Diners are adapting, too, often opting for small plates or shareable options to keep costs down. Many have significantly reduced their dining-out frequency.

“I haven’t eaten out since last August,” said Andra Farmer of North Chesterfield. “It has become unaffordable.”