Inflation, labor and delta variant hit restaurant owners, Goldman Sachs data finds
Restaurants around the county were looking ahead to the economy’s reopening over the last few months, as Covid vaccines became more widespread and pent-up consumer demand was palpable.
The contagious Delta variant, which is threatening the economy’s normalcy, has created headwinds in the supply chain.
According to the Goldman Sachs 10,000 Small Business Voices Program, small-business owners in the hospitality, food, and restaurant sectors are most concerned about the continued disruptions caused by the pandemic. These owners are more concerned than 75% about the effects of increasing Covid-19 infections on their business.
Nearly everyone has experienced an increase in operating expenses. 93% of those surveyed said that inflationary pressures had risen since June. This is having a negative effect on their finances.
A larger survey of 1,145 Goldman Sachs 10,000 Small Businesses participants earlier in the month yielded data that includes 117 hospitality, food and restaurant owners.
The figures underscore the sustained pressure facing restaurants even in an economy that has rebounded from the worst of the damage inflicted by the coronavirus. Restaurant owners are looking forward to the fall, despite the fact that the industry has seen a return to normalcy with the introduction of vaccines as well as looser restrictions on public health.
Ruby Bugarin runs Margaritas and Pepe’s in Los Angeles. She said that both higher prices and the lack of available goods have hurt her business. Crab is more difficult to find. Chicken and pork prices have increased more than $1 per pounds, while other goods are selling at a higher price.
Avocado prices have risen from $40 per case to $85 over the past couple of weeks. That’s almost twice,” Bugarin said, who is a Small Business Voices member. “We can’t do the same thing to our customers — we raise prices once or twice a year.”
Both of her restaurants employ 63 people. Bugarin indicated that she is interested in adding a couple of cooks to each restaurant, however she continues to pay her staff overtime weekly.
Restaurant, food, and hospitality business owners such as Bugarin have been hit harder than other small-business owners. According to data, 79% said that workforce problems have worsened in the past year than 64%.
The National Federation of Independent Business has released recent data that highlights the impact of labor problems on small businesses optimism. For the second consecutive month, August saw a rise in unfilled jobs above the 48 year-old historical average.
Joe Wall, National Director of Goldman Sachs 10,000 Small Businesses Voices, stated that 67% of small business owners believed the U.S. was heading in the right direction in June, “despite inflation and despite workforce difficulties.” That number has now risen to 38%. It is the most popular theme. The first reason sentiment has changed is the delta variant. Next, you add the inflation dynamics and workforce problems.
According to Goldman’s data, nearly 40% of restaurant and food service businesses expect to need a loan this winter or fall to fund their operations. This is compared to just 29% overall.
Recently, the Small Business Administration announced a revamp to their Economic Injury Disaster Loan Program for Businesses. Increased loan limits to $2M will allow recipients to prepay their business debt. Restaurants can then use this money to pay off commercial debt.
According to Sean Kennedy (executive vice president for public policy, National Restaurant Association), “These changes will improve both the outlook for thousands and lift the economic outlook of communities large and small.” This group collaborated with the SBA to develop the terms that are best for small business.
These changes were not the only ones. Advocates for small businesses and restaurateurs also called upon lawmakers to replenish $28.6 trillion Restaurant Revitalization Fund. Although it provided grants for the industry, they were quickly exhausted because of high demand.
We were able distribute it to more than 100,000 companies across the nation. But, there was 2.5 times as much demand,” Isabel Guzman (SBA Administrator) told CNBC about the RRF last month. There are still food and drink businesses that need assistance. We know these were the most affected and will often be the last ones to reopen in their communities. Yet, they are the heart of many Main Streets. While I am unable to comment on specific Congress actions, however, the SBA is ready and available to handle these programs efficiently, fairly, and quickly.