Inflation is challenging restaurants that survived the pandemic Higher costs for food, labor, rent, gasoline and cooking gas make it harder for casual dining places to buy, cook and deliver meals. And they're limited in how much they can pass on to customers.

Restaurants that survived the pandemic are now threatened by inflation

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RACHEL MARTIN, HOST:

They managed to survive the worst of the pandemic. But now some restaurants fear it may be inflation that does them in. Restaurants are facing sky-high food prices and higher costs for labor, gas and rent. NPR's Tovia Smith has more.

TOVIA SMITH, BYLINE: Joseph Charles worked nonstop for years, saving every penny to open his own pizzeria, Rock City Pizza.

JOSEPH CHARLES: Start packing up these pizzas.

SMITH: When the pandemic hit, Charles was relatively lucky, being in the outskirts of Boston rather than the deserted downtown, and managed to survive by hustling pizzas and subs out his takeout window.

CHARLES: It was real tough - real trying times. But, you know, we did what we have to do. And fortunately, we're here now.

SMITH: But unfortunately, facing even more trying times, Charles says. His sales over the last two years were about 75% of what they were pre-pandemic. Now he says they're about half, as his clientele is reacting to price increases.

CHARLES: It's harder to do business than it was in the pandemic. It is. You know, inflation is ridiculous right now.

SMITH: While everyone is feeling it, lower-priced restaurants like Charles' are in a particularly tight spot. Wholesale food costs are up 17%, according to federal statistics. Meantime, Charles' rent jumped about the same amount. He's paying his staff more than 1 1/2 times what he did two years ago and even more to his delivery guys, as gas prices have spiked, and he's covering some of the increase.

CHARLES: Fridays and Saturdays, you know, I pay them - before $300, $400 in labor. Right now is easily a thousand. It's - you got to be creative to keep them. You really do.

SMITH: To compensate, Charles has been raising prices so often he stopped printing paper menus. But there's a limit, he says, to how much a place like his can pass on to customers. A large, plain pizza is already 19 bucks. Add mushroom and onion, delivery and tax, and you're at 31 bucks and change before the tip for the delivery guy.

CHARLES: At the end of the day, we still sell pizza. We're not selling diamonds. And you have a ceiling to what you can charge the customer.

SMITH: And customers are paying attention.

ALEXIS LEE: It used to be two for five - the pizza, two slices. Now it's, like, $7. It's up $2 more.

SMITH: Alexis Lee is still coming in for the lunch special, but she says other things she used to buy have become too much for her.

LEE: I said forget about it. Yeah.

SMITH: It's a lesson Charles learned the hard way, like when he had to raise prices on chicken and steak dishes and customers simply stopped buying them. It all left Charles thinking about having to shut down.

CHARLES: It's scary times, and it makes you think, how long can we do this?

SMITH: Some 90,000 U.S. restaurants have closed down since the pandemic, according to the industry. Many who survived are now running on razor-thin margins. At the same time, Cornell University finance professor Steve Carvell says small, affordable places are also under more competitive pressure from low-priced big chains, like Chipotle or Panera.

STEVE CARVELL: Because they're larger, they have better supply chains, more consistent costs on their inputs. So, you know, it gives them more leeway to maintain a profit margin.

SMITH: Recent surveys suggest dining out is one of the first things people would cut because of inflation. At a supermarket around the corner from Rock City Pizza, many shoppers say they've already traded eating out for more cooking at home.

CHRIS PUZACKE: But yeah, for me, it's seltzer water and ground turkey for the time being.

SMITH: Chris Puzacke says he's cut eating out from his usual 3 to 4 times a week to less than once, even saying no to his favorite chicken wing place.

PUZACKE: The first thing that came to mind was, I can only imagine how expensive a plate of chicken wings is right now. So I skipped it.

(SOUNDBITE OF FOOD PREPARATION)

CHARLES: Go. Quickly.

SMITH: For now Joseph Charles continues pushing pizzas out the door.

CHARLES: Let's do it.

SMITH: And instead of raising prices any more per pie, he says, you have to be creative, like charging $0.10 more per topping, hoping customers don't balk.

CHARLES: Thank you.

SMITH: He's doing everything he can think of to avoid having to surrender now to inflation after beating COVID.

CHARLES: It's like, you saw it. You won. But we're not done yet. And it's drastic enough to reevaluate your situation.

SMITH: Especially since COVID came with government stimulus checks and relief measures. For now Charles says he's got nothing of the sort.

Tovia Smith, NPR News, Boston.

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