On November 14, 2023, Square released the newest edition of its quarterly Restaurant Industry Report. The restaurant POS system and software provider used data from their food and beverage sellers to establish trends in consumer spending, wages, operations, marketing strategies, and more.
According to Square, restaurants are leaning into the continued demand for takeout and delivery, even during the holidays. For Thanksgiving, they’re offering prix fixe meals to-go, giving customers unencumbered time to spend with friends and family while still sharing a delicious meal. Calculating the cost of these meals across the nation, Square came up with an average cost per person of $34.
Downtown Dining Plateaus
Restaurants in downtown areas have experienced a decline in traffic thanks to the popular hybrid workforce model that appears to be a permanent post-pandemic change. While the start of 2023 found sales going back to pre-pandemic levels Tuesday through Thursday, Mondays and Fridays, once the most popular weekday for going out, still waned due to three-day work schedules.
Square’s analysis reveals downtown area restaurants are stabilizing, though still below pre-pandemic levels. When comparing transactions from 2019, they found that these restaurants had flatlined at about 72% of their pre-pandemic status. In contrast, they also found that some downtown areas are thriving, surpassing pre-pandemic numbers. The following represent those areas with the greatest increase in food and beverage transactions since 2019.
- Detroit: 75% increase
- Los Angeles: 18% increase
- Miami: 17% increase
- Boston: 2%
So, one wonders, what’s happening in Detroit, and is it catching?
The Next Big Foodie Hotspot: Detroit
A recent JPMorgan Chase Institute study revealed that the cities with the fastest-growing restaurant scenes include Detroit, Atlanta, Denver, and Portland, OR. The leader of the pack? Detroit, with an annual spending jump of 10.5 percent.
Why? According to the food and beverage manager at Red Dunn Kitchen, Dustin Walker, it comes down to saturated markets in the larger cities. Detroit is stabilizing after experiencing extensive population loss, with people moving into once-neglected neighborhoods. Vibrant art and music scenes and “cool” neighborhoods are helping define Detroit as the comeback kid. Even National Geographic agreed, naming Detroit one of the top six foodie cities.
And, while on the upswing, there are still great deals to be had by restauranteurs, who are able to negotiate leases and terms with suppliers. According to Walker, “These factors make it easy for mom-and-pop places to turn a profit, and also make it attractive for big money players to help with the resurgence.”
Increase in Restaurant Wages Slowing
A new offering by Square, the Square Payroll Index, lets restaurant owners compare their employees’ wages and tips with national averages. To attract workers during the extensive labor shortages, restaurants have been raising wages. In March 2022, the average per-hour rate was $12.80, increasing to $16.42 when tips were added.
Today, while wages have further increased to an average of $13.80 per hour and $17.67 with tips, the increase has slowed from about 8.5% to 4.6%. Cities showing the greatest year-over-year wage growth as of October 2023 are Cincinnati, Las Vegas, and Jacksonville.
Recurring Revenue and Subscriptions
If the pandemic revealed anything, it was the need for restaurants to embrace multiple revenue streams. One of these revenue streams that gained traction and continues today is subscriptions for memberships.
Square found a 54 percent year-over-year growth in active buyer subscriptions as of August 2023. Even more impressive was that 57 percent of these subscriptions were active after six months. Some popular subscriptions are wine clubs, fresh jams, and sauces.
Setting Sights on 2024
The next step for many is ensuring a successful ending to an interesting year. Then, many will set their sites on their next location, changing menus, or the many other continual adjustments required in this never-boring industry.
At Emerging Concepts, we work with today’s leading restaurant and entertainment concepts, developing successful expansion strategies. Using extensive data analytics combined with our in-depth knowledge of real estate and the restaurant industry, we evaluate real estate opportunities across the country, optimizing opportunities for success. To learn more about the country’s changing restaurant landscape or to schedule a consultation, contact Emerging Concepts today.