Square’s Fall Quarterly Restaurant Report: Full-Service Restaurants See Higher Wage Growth, Corresponding to Increased Inflation

Full-service restaurants have experienced higher inflation compared to quick-service restaurants (Graphic: Square)
Full-service restaurants experience higher inflation
Following the COVID-19 pandemic, restaurants began to experience higher inflation caused by a number of factors like labor, supply chain issues, growing food prices, and increased operating costs. When comparing the price change for top selling items at restaurants, Square found that since February 2020, full-service restaurants have been hit harder with inflation compared to quick-service restaurants.
Inflation peaked for full-service restaurants in April 2022 at
“Despite inflation easing, restaurants are continuing to face a number of challenges in their operations whether it’s fluctuating food prices, employee retention, or ballooning payroll costs. Many restaurants are grappling with how to balance these increased expenses while still offering affordability to customers. We’ve seen some restaurants lean on automation and other time-saving technology to keep margins under control,” said Ming-Tai Huh, Head of Food and Beverage at Square.
Wages grow faster among full-service restaurants workers
Increased labor costs have been a contributing factor to inflation in restaurants, with a larger part of a restaurant’s total revenue going towards payroll. This is especially true for full-service restaurants, where workers have seen faster wage growth compared to employees at quick-service restaurants. According to the Square Payroll Index, when tracking average hourly earnings (inclusive of base pay, tips, and overtime), wages for full-service workers have grown
“The cost of labor is growing faster than revenues in some segments, compressing margins in an already tight sector. This trend will likely continue. Restaurants are hesitant to raise prices on consumers, but we remain in a pretty hot labor market so wage increases will have to come from somewhere if restaurants want to remain competitive,” said Ara Kharazian, Square Research Lead and principal developer of Square Payroll Index.
How much of a restaurant worker's income comes from tips?
In 2024, Square found the average restaurant worker earns nearly
Nationally in 2024, Square observed the average tip on a restaurant transaction was
“Tips are a way for customers to reward our employees for their service, but our goal is to welcome anyone in so while tips are highly appreciated, it’s also understandable if tipping isn’t within someone’s budget,” said Jeff Litsey, owner of Calvin Fletcher’s Coffee Company in
Cafe culture differs across the world
Specialty coffee shops and independent cafes continue to be prominent hotspots within their communities, with same-store transactions at these establishments up
Square found that
About Square
Square makes commerce and financial services easy and accessible with its integrated ecosystem of commerce solutions. Square offers purpose-built software to run complex restaurant, retail, and professional services operations, versatile e-commerce tools, embedded financial services and banking products, buy now, pay later functionality through Afterpay, staff management and payroll capabilities, and much more – all of which work together to save sellers time and effort. Millions of sellers across the globe trust Square to power their business and help them thrive in the economy. For more information, visit www.squareup.com.
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Source: Block, Inc.