Business conditions worse than three months ago, say nearly half of restaurant operators: Association survey

Wholesale cost inflation outpacing menu price increases; meanwhile, operators cannot pay pandemic loans now due as majority say they have jobs that are hard to fill

A total of 46% of operators indicate that business conditions, currently, are worse than they were three months ago. The update from the National Restaurant Association uses newly-released survey data. It follows a previous survey in which operators said they thought conditions would worsen in the next six months—the highest level of pessimism since 2008.

Soaring costs limit restaurant operations

About 95% of a restaurant’s sales dollars go to food, labor, and operating costs—all of which are increasing each month. Menu prices have not kept pace with wholesale food price increases. Menu prices increased only 7.6% while wholesale prices surged 16.3% in the past 12 months.

An upside down economic reality is not helping restaurants at all, and profits are suffering, said the Association. Despite the economy, only 16% of operators report adding fees or surcharges to customer checks. What’s worse, 85% of operators say their restaurant is less profitable than it was in 2019.

In addition, the Association’s new survey suggests that food and beverage costs are higher than in 2019. In fact, 88% of restaurant operators are indicating this. Furthermore, the survey revealed the following:

  • Some 65% of operators say their total occupancy costs are higher than 2019
  • A total of 80% of operators indicate total utility costs are higher than 2019
  • Also, 94% of operators say operating costs (supplies, G&A, + more) are higher than 2019

“Running a restaurant is a balancing act requiring adaptation and innovation, two areas where restaurateurs excel,” said Michelle Korsmo, president and chief executive of the National Restaurant Association. “And while operators are more pessimistic about the economy, they are working hard to continue to provide quality and value for customers. Serving great food, providing exceptional service, and creating a memorable experience remains the foundation of every restaurant.”

For many operators who received EIDL loans, the deferment period for payment will soon end and it will be an overwhelming challenge for a majority of them to begin repayment right now

Michelle Korsmo, National Restaurant Association

Pandemic debt has come due, while operators cannot pay

Inevitably, debt taken on by restaurant operators would come due. A total of 65% of restaurants did take on new loans to adjust “business models and continue operating,” per the Association. Data from the new survey indicate the mix comprises forgivable government loans, government disaster loans, and private-sector loans. Also:

  • The Paycheck Protection Program (PPP)—taken on by 59% of operators—were the most common.
  • 48% of operators took on an Economic Injury Disaster Loan (EIDL), which is issued by the US Small Business Administration or one of its lending partners.
  • A total of 31% took on a private-sector loan from a bank, credit card or other entity.

“For many operators who received EIDL loans, the deferment period for payment will soon end and it will be an overwhelming challenge for a majority of them to begin repayment right now,” noted Korsmo. “According to our latest survey, of the operators who have not begun loan repayment, only 23% say they will be able to make principal and interest payments. Another 46% expect to be able to pay the principal, but not 30 months of accrued interest.”

Restaurants look to fill jobs to return to pre-pandemic employment levels

Even as they face the challenges of a slowing economy, a large share of restaurants are hiring to fill much-needed positions. And despite the 74,000 jobs that were added in July, 65% of operators now say that they don’t have enough employees to support customer demand. What’s more, 84% of operators say they will likely hire additional employees during the next six months.

  • Moreover, a total of 19% of full-service operators indicate their restaurant is currently more than 20% under necessary staffing levels.
  • And 21% of limited-service operators say their restaurant is more than 20% below required staffing levels.
  • Plus, a total of 81% of restaurant operators say their restaurant currently has job openings that are hard to fill.

Added Korsmo, “Diners choose restaurants for the hospitality and experiences they get at our tables, and we hire talented people to create that atmosphere. While many industries are beginning to slow their hiring, ours continues to rebuild our workforce. The restaurant industry has good-paying jobs available at every experience level for people from every background. And these jobs provide the skills necessary to be successful in any career, and in life.”

The National Restaurant Association Research Group conducted the new operator survey from July 14 to August 5, 2022. It included 4,200 restaurant operators and the report findings are the basis for this update from the Association.

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