Study: Restaurants are becoming less confident about the economic future

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Operators are expressing concerns about profitability, reduced hours of operation, postponement of development plans, capacity constraints and staffing levels.

Nearly 50% of operators believe conditions are worse compared to the past three months, underscoring growing concerns over historic inflation and declining profitability.

The findings come from a National Restaurant Association survey of more than 4,200 operators conducted from July 15 to August 5. A majority do not expect a return to normal in the foreseeable future. In fact, 41% think it will take more than a year and 12% say it will take 7-12 months. Nearly 30% believe business conditions will never return to normal for their restaurant.

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

Much of the pessimism stems from constant inflationary costs. An overwhelming number of restaurateurs say their dues are higher than pre-pandemic totals; 88% said the same for food and beverage expenses, 86% for labor, 65% for occupancy, 80% for utilities, and 94% for operations. To mitigate these challenges, 91% raised menu prices. Overall restaurant menu prices jumped 7.6% in July from one year to the next. That’s slightly below June inflation, but still near a 40-year high. Prices for full-service meals increased by 8.9%, while prices for quick-service menus increased by 7.2%.

A bright spot for operators is the growing gap between restaurants and grocery stores. For the latter, prices soared 13.1% in July, creating the biggest difference between restaurants and grocery stores since the 1970s. Still, operators are expressing concerns about reduced hours of operation, postponement of development plans, capacity constraints and staffing levels. Around 24% say they’ve integrated more technology to combat headwinds, and 16% have been forced to cut third-party deliveries to cut costs.

Around 85% say they are less profitable compared to 2019. Only 6% say they are more profitable.

“Consumers see prices rising faster in grocery stores than in restaurants and see increased value in spending their money in restaurants. However, moderate menu price increases are not balancing soaring input costs and this is forcing operators to reduce hours, modify their menus, postpone expansions and reduce third-party delivery,” said Korsmo.

In light of these concerns, more financial assistance from the government does not appear imminent. Congress passed the $28.6 billion Restaurant Revitalization Fund in March 2021. More than 100,000 concepts were helped by this capital injection, but more than 177,000 others applied, but received nothing . It was revealed in late July that the Small Business Administration had $180 million in unused funds, but there’s no timeline or explanation of how that would be distributed.

About 59% of operators received funding from the Paycheck Protection Program and about 48% took out an economic disaster loan. Just over 31% received a private sector loan from a bank, credit card or other entity. Forty-six percent say they can make EIDL principal payments, but not the 30 months of accrued interest. Thirty-one percent say they will not be able to make principal or interest payments.

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