Labor Costs and Wage Inflation: Pricing Limits and Workforce Cuts
Companies reported higher labor burdens and warned of limits on passing costs to customers, alongside approaching union-contract expirations and planned workforce cuts.
Cracker Barrel Old Country Store, Inc. (CBRL), the store operator, said labor and related expenses increased to 37.3% of total revenue in 2026 from 36% in 2025. The company attributed the increased revenue shares for hourly labor and store management compensation primarily to lower productivity and the effect of declining revenue.
Other operators described cost increases that had already affected their businesses. Driven Brands Holdings Inc. (DRVN), which operates automotive-service locations with franchisees, said ongoing increases in wages, benefits, insurance and other operating costs had adversely affected operations and administrative expenses at its locations. Darden Restaurants Inc. (DRI), the restaurant operator, said labor shortages, turnover and health care and other benefit or working-condition regulations had increased labor costs and may continue to do so.
Darden warned that higher labor costs could prompt menu-price increases that hurt sales, and that competitive pressures could prevent sufficient increases to protect profitability. FIGS, Inc. (FIGS), the product seller using third-party logistics providers, reported that those providers’ hourly wages had periodically increased because of inflation, creating potential pressure on fulfillment costs. FIGS also said it had increased prices on certain products and warned that price increases could reduce sales.
Wage requirements could extend those pressures across pay grades and business partners. Lucky Strike Entertainment Corp. (LUCK), the location-based entertainment operator, said a significant federal minimum-wage increase, changes to tip-credit wages and additional mandated benefits were “becoming increasingly likely.” The company warned that such changes could raise pay for employees already earning above the minimum and said many vendors, contractors and partners had increased or would increase prices to offset labor costs. Darden also warned that minimum-wage increases may require higher pay for employees earning above statutory floors.
Lamb Weston Holdings, Inc. (LW), the food manufacturer, attached a specific deadline to its labor exposure: 74% of its union-represented hourly employees were covered by agreements already in negotiations or scheduled to expire over the next twelve months. The company warned that renewals may be delayed or completed on unsatisfactory terms, and that strikes or interruptions could affect operations and customer service. Lamb Weston also described its labor market as “increasingly tight and competitive,” recalling shortages in fiscal 2022 and 2023 that reduced production run rates and increased manufacturing costs.
Intapp, Inc. (INTA), whose web-based services require qualified personnel, including employees with AI expertise, retained an explicit qualification: it had experienced no material labor shortage to date. The company identified AI expertise as an area of potential labor-cost pressure and warned that mitigation measures could harm client service or retention. Intapp also said automation and other labor-saving initiatives may fail to offset competitive wage increases, and that revenue may fail to keep pace with higher labor costs.
Bicycle Therapeutics Plc (BCYC), the biotechnology company, provided more detail on workforce reductions in July after warning in April that reductions might fail to deliver anticipated benefits and that inflation could increase compensation costs or attrition. In July, the company specified that the reduction announced alongside its March strategic reprioritization covered approximately 30% of its workforce. It warned of lost expertise, additional attrition and difficulties redistributing departed employees’ duties.
Bicycle said the workforce reduction and strategic reprioritization together are expected to reduce annual operating expenses by approximately 50%, based on current plans. The company expects the reduction to be substantially completed by the end of 2026 and anticipates approximately $6.5 million in cash charges for severance and other termination benefits. Insufficient personnel could also constrain new initiatives or require additional hiring costs, the company warned.