Carrols Restaurant Group Inc., the largest Burger King franchisee in the U.S., plans to reduce chicken nugget portion sizes because of rising beef and labor costs.
“Domestic food, paper producers and distributors supplying most of our commodities are dealing with labor constraints along with higher fuel costs and are passing these increases on to us,” Chief Executive Officer Dan Accordino on an earnings conference call.
“There’s no question that our current cost challenges are among the toughest, if not the toughest, I have seen in all my decades as a restaurant operator.”
Beef costs for the company grew 33% in the fourth quarter of 2021 compared to the year before, while hourly wage rates increased by 14% in the same period, Accordino explained.
In addition, adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization that’s been adjusted for one-time events, declined to $13.9 million from $31.8 million in the same period a year earlier.
To combat rising costs, the number of chicken nuggets in Burger King meals will be reduced from 10 to eight. In addition, the company plans to raise menu prices again in 2022.
Carrols Restaurant Group operates 1,000 Burger King locations, approximately one out of every seven of the quick service restaurants units.
Inflation to ease by the end of 2022?
According to Accordino, Carrols believes that inflationary pressure will begin to ease by the end of the year.
“While we cannot predict when these inflationary cost pressures will end, we can say that we believe that in the back half of 2022, the year-over-year percentage increases for labor and commodity costs will moderate,' he added.
Accordino’s words echo the sentiments of Wingstop CEO, Alex Kaleida. During an earnings call earlier this month, Kaleida told investors that “we believe the worst is behind us.”
Wingstop bone-in chicken wing prices increased 40% in 2021 compared to the year before, of which approximately half was passed on to customers. Kaleida estimated that this will level out to one to two percent in the coming year.
