Total of 59% of operators have changed menu items amid challenging economic environment, according to Business Conditions survey
A recent survey suggests that restaurant operators are making tough decisions amid the challenges of higher food costs, labor expenses and energy/utility costs. The National Restaurant Association Business Conditions survey reveals how operators are responding to the challenge. Inflation has impacted supply costs, increased borrowing expenses and triggered menu price increases.
The National Restaurant Association Research Group conducted the recently-released operator survey of 3,000 restaurant operators in November 2022. In addition, the Association will release the 2023 State of the Restaurant Industry report in February. It highlights the latest data forecasting trends critical to the industry’s growth and success in the new year.
“The restaurant industry is ending the year in an environment that’s the most typical since 2019,” said Hudson Riehle, senior vice president of research for the National Restaurant Association. “Moderate but positive employment growth across the economy and elevated consumer spending in restaurants will allow the restaurant industry to kick off 2023 on a more optimistic note than the last few years, but operators remain braced for potential challenges in the new year.”
According to the Association, food and labor costs have each been running at about 33% of gross sales. The category of other expenses, including utilities, occupancy, supplies, general & administrative, and repairs/maintenance combine for 29% of sales.
In fact, 92% of operators say food costs are a “significant challenge.” They are also struggling with labor with 89% of operators saying labor is also significantly challenging. In addition, 50% of operators indicate they will make less profit in 2023.
The Association stated, “In November, the Producer Price Index for All Foods—which represents the change in average prices paid to domestic producers for their output—rose for the 18th time in the last 23 months, with 15 of those increases topping 1%. While menu prices also increased 8.5% between November 2021 and November 2022, these increases are lower than grocery store prices which increased 12% over the same period.”
Here are additional findings:
- 87% of restaurants increased menu prices
- 59% changed the food and beverage items offered on their menu
- 48% reduced hours of operation among days open
- 32% closed on days that they normally had been open
- 38% of operators say they postponed plans for expansion
- 13% of operators indicate they eliminated third-party delivery
- 19% postponed plans for new hiring
In the last 23 months, restaurants added almost 2.2 million jobs. This is 400,000 jobs more than the next closest industry—professional and business services—added in the same period. However, it should be noted that the restaurant industry is still 462,000 jobs below its employment level attained February 2020.
According to the survey, a majority of both full-service operators (63%) and limited-service operators (61%) say their restaurant does not have enough employees to meet current customer demand.
A total of 87% of operators indicate they are likely to hire additional employees during the next 6 to 12 months. At the same time, unfortunately, 79% of restaurant operators are finding it hard to fill job openings their restaurants currently have.
Restaurant operators are focused on their businesses and will match staffing with business conditions. However, 57% of them say they would be likely to lay off employees during the next 6 to 12 months if business conditions deteriorate and the US economy enters a recession. Restaurant industry stakeholders can find additional data here.
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