Restaurant recovery is being slowed by labor, supply costs
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Robert Freeman hopes Congress will support the Restaurant Revitalization Fund, as his restaurant is still struggling in this pandemic.
Kate Rogers | CNBC
A new study has revealed that rising food and labor costs have eroded the industry’s hard earned gains, causing delays in recovery.
As we enter the third decade of the year, the world begins to feel the effects. the ongoing pandemicRestaurant owners are adapting to do business in the face a slew of obstacles, from inflation to labor, and Covid variants. While sales are rebounding, a report from the National Restaurant Association suggests it will be a year or more before conditions return to normal as tens of thousands of restaurants have shuttered — some permanently.
In its Tuesday “State of the Restaurant Industry Report”, the group projects that the industry’s foodservice sales will hit $898billion this year. That is up from $799billion in 2021. The figure surpasses the pre-pandemic level of $864billion in 2019, which the group estimated in their “State of the Restaurant Industry Report”. But, after inflation adjustments, the group projected that 2022 sales will be below those of pre-pandemic. Many of the gains last year were due to increased prices, as operators’ costs shot up.
Get off to a ‘pretty sober’ start
“2022 for the restaurant industry will remain another year of transition, and the year is off to a pretty sober start,” said Hudson Riehle, senior vice president of the association’s research & knowledge group. Restaurant owners across the nation are now saying that business conditions are worse today than they were three months ago. The environment is volatile and unpredictable.
The group data shows that more than half of operators think it will take at least one year before business returns to normal. However, many operators from fast food to fine dining said they believe sales will grow or maintain this year. This is a cautious optimism.
It was created from data collected by 3,000 operators between November and December 2021.
Robert Freeman’s San Francisco restaurant The Buena Vista Cafe is experiencing some improvement, though it remains a challenging environment. The sales fell more than 60% by 2020 and then rebounded to 31% by 2021.
“It’s been a little like Coney Island — up and down on a rollercoaster,” Freeman said of the Covid variants and operational regulations that have shifted over the last two years.
According to data, 7 out of 10 on-premise restaurants like Freeman’s still lack the staff they need. Family and fine dining were most affected by the shortage. The data shows that the sector gained 1.7 million new jobs by 2021.
Freeman indicated that Buena Vista may need about six more people at this time. For the sake of efficiency, he works shorter shifts.
Profits are under Pressure
Riehle stated that while labor is still a major challenge, inflation comes in second. The percentage of food expenses in restaurant sales has increased for nine out of ten operators, compared to levels pre-pandemic. Meanwhile profits have dropped for 80% operators when compared to 2019. What’s more, 96% of operators experienced supply delays or shortages of key food or beverage items in 2021 — and these challenges will likely continue in 2022.
Riehle explained that “there has been a rapid escalation in restaurant operator input cost at a moment when consumer demand remains pretty weak especially for those on site dining occasions.” “In this environment, the operator is extremely, extremely — not only careful about raising menu prices — but looking for more productivity and efficiency in the typical restaurant operation.”
In order to weather any storms that may come, the operators also relied on innovation and technology. QR code ordering, delivery, outdoor dining parkletsAnd alcohol-to-go. According to industry operators, off-premises meals accounted for a greater percentage of daily average sales than before the pandemic. Many plan to invest more in this segment of their business by 2022.
Are you looking for a lifeline?
A second lifeline for the sector is still needed. National Restaurant Association urges Congress to restore the Restaurant Revitalization FundThe group cited its own data showing that half of the 21.8 billion-dollar program’s restaurant owners did not get RRF grants. This means that it is unlikely they will be able to continue their business after the outbreak. This group estimates that $48 billion will resolve the 170,000 applications for Small Business Administration grants, which are still being processed.
Freeman was one of those initially informed that the cafe would be awarded a grant. The grant was then canceled.
I understand that there was not enough money. But why didn’t they do it on a pro-rata basis?” If you have $30 billion, it would be so easy. He said that everyone would have received something and nobody would be in my position.
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