Restaurant industry sales are expected to reach $898 billion this year, up from $864 billion in 2019
Who could have predicted that we would be entering the third year of a global pandemic that has gutted much of the restaurant industry, creating in its wake a debilitating workforce, supply chain and inflationary pressures?
To say that this unprecedented confluence of challenges has been devastating is an understatement. But crises always teach lessons and for the restaurant industry, some of those lessons are illustrated in the State of the Industry report recently released by the National Restaurant Association.
Operators have shown (and maintained) their creativity and resilience, adjusting opening hours to deal with labor shortages, raising prices to manage inflation and, most importantly, providing consumers with the amenities they need. they expect now. These adaptations aren’t exactly easy, but they may be necessary to heal the industry’s wounds for another year.
This year, by the way, the restaurant industry is expected to reach $898 billion in sales, an increase of $99 billion from 2021 and an increase of $220 billion from this unprecedented 2020. .
Notably, the 2022 projection, if materialized, will surpass pre-pandemic sales levels. The industry totaled $864 billion in sales in 2019. Much of these current sales are expected to come from price increases, which are about 8% higher in quick service restaurants and 6% higher in restaurants. full-service compared to 2020. But the benchmark comparison is worth mentioning given that the industry is significantly smaller — by around 80,000 establishments — than it was in 2019.
Although sales – and at some brands, cash flow – are rapidly moving in the right direction, the association’s report notes that many challenges will remain this year – namely labor pressures. Total employment in the industry is expected to reach just under 15 million jobs in 2022, only about 400,000 more than the previous year (and not a lot for a massive industry that is expected to return to strong growth). As of mid-2021, 1.7 million jobs in the sector remained unfilled, the highest number in 20 years of reporting this data.
The workforce void comes as the industry experiences an unprecedented quit rate, with most of those employees leaving for another trade. The trend has caused most operators, 65%, to reduce their opening hours over the past three months.
It also has major implications for restaurant owners struggling to meet the strong demand for more channels, including delivery, curbside and takeout. Offsite business has been a major lifeline for the entire industry as dining halls have closed and consumers have felt anxious, and most operators expect business to remain high in 2022. Consumers have proven they want – and will pay for – more offsite options. , operators therefore have many incentives to ensure that these channels are adequately staffed.
So about half of operators across all segments expect recruiting and retention to be their biggest challenge this year and they are doing everything they can to manage a workaround: bonuses, tuition discounts, stipends childcare, vacation allowances, free iPhones, etc. name it. Seventy-five percent of operators plan to devote more resources to recruitment and retention this year.
Labor is one of the many challenges facing the industry and contributes to growing operating costs across the board. In 2021, the average hourly wage exceeded $15 For the very first time. At the same time, inflation reached its the highest level in 40 years and consumer prices jumped 7%. According to the association’s report, 80% of operators are paying more for labor than a year ago, and the combined costs of food, labor and occupancy are now around 70 cents of every dollar generated from sales.
Unsurprisingly, these pressures are compressing profits, and 80% of operators said their profit margin was lower than it was before the pandemic, while only one in 10 said it was higher. These figures are reflected in another recent report from TouchBistro, finding that full-service restaurant profit margins fell two percentage points in 2021 compared to 2019, despite a majority of operators maintaining or increasing sales. Only 25% of operators across all segments believe they will be more profitable this year than last.
Although more than half of all operators predict that it will take another year “or more” before their business returns to normal (by any definition currently), there are several reasons for optimism. For starters, the omicron variant, which has particularly upset the indie sector, seems to be on the decline.
Additionally, most restaurateurs expect to maintain or increase sales in 2022, with almost half forecasting higher sales than in 2021 and 40% expecting similar levels. Four in 10 operators expect their sales to top pre-pandemic numbers.
And, the macro consumer environment looks favourable, which is always a good sign for restaurants. The National Restaurant Association report shows levels of household wealth and savings are “well above” pre-pandemic levels and debt levels are lower. In the second quarter of 2021, total household net worth hit a record $141.7 trillion, a 28% increase from the first quarter of 2020. Although it has been almost a year since the last round of stimulus checks was released, personal savings rates remained above pre-pandemic levels.
This might explain why customers are looking for more expensive restaurants despite rising menu prices in the industry, according to data from Yelp.
Restaurants may also have an edge in the fight for stomach share, as inflation hasn’t hit food outside the home as much as the grocery sector. According to the Ministry of Laborhome food prices rose 6.5% in December year-on-year, compared to 6% for eating out.
Additionally, and perhaps most importantly, there is a lot of pent-up demand. Fifty-one percent of adults say they don’t eat out as often as they would like, up six percentage points from before the pandemic. This request will likely be a boon whenever the omicron variant subsides and warmer weather returns. The question then becomes whether restaurants will have enough staff to handle such an influx.