Operations

The Restaurant Industry’s New Normal in 2022

The Morning Consult continues to track the “Return to Normal” and how consumers are responding to the rise and fall of the various COVID-19 variants. Each week they survey about 2,200 U.S. adults to see where they stand as the country finds its footing.

The week of February 10, 2022, saw Americans’ comfort level with dining in restaurants holding steady, with 67% of adults saying they feel comfortable eating out. Further good news is that consumers continue to feel more comfortable with indoor dining, which climbed two percentage points to 66%. Outdoor dining continues to hold at 74%.

When asked how often they dine out, their responses varied, with 15% dining at a restaurant once a week, 16% heading to a restaurant several times in a month, and 19% making the tip just once a month. Surprisingly, while more customers still ordered takeout, the numbers were very close, and delivery took third place in consumer choices.

The New Restaurant Landscape

The big question is, what are returning guests finding when they head back to their favorite restaurants? They are craving the experience they missed due to the pandemic, and operators are finding ways to deliver that, despite rising food costs and diminishing employees.

According to QSR Magazine and the National Restaurant Association’s 2022 State of the Industry report, 17% of the 3,000-plus restaurant operators surveyed believe that conditions will never return to normal. About 40% think it will take more than a year for “normalcy” to return, and a hopeful 17% say they expect to be entering the sphere of normal in 7-12 months.

The senior vice president of the Research and Knowledge Group at the Association agreed that normal might never return. According to Hudson Riehle, “Restaurants and their patrons have found themselves in a ‘new normal.’ Given emergent technology, changing consumer behavior and dining preferences, and the extraordinary challenges of the last two years, the industry is unlikely to ever completely return to its pre-pandemic state.”

The Sales Forecast

The numbers, on paper, look good. The restaurant industry is projected to increase its earnings by $34 billion compared to 2019. This amounts to $898 billion in sales in 2022. However, when adjusted for inflation, sales show an 11.5% decline compared to three years prior.

Because of rising costs, 80% of those surveyed said their profit margins are lower than before the pandemic struck.

The Bureau of Labor Statistics reports that consumer prices for all items rose 7% from December 2020 to December 2021. This reflects the largest December to December increase since 1981. During this same time, food prices increased by 6.3%, and food at home prices rose 6.5%, the largest increase since 2008.

The big increases came from meats, poultry, fish, and eggs, which rose 12.5%, almost tripling their single-digit gain in 2020.

The Rising Menu Prices

As supply diminishes and prices rise, restauranteurs have little choice but to keep up with the times and raise their prices. Restaurant menu price inflation reached the highest level in 40 years, with full-service and limited-service restaurants raising prices at least 7% in 2021. According to Restaurant Business, brands like McDonald’s and Starbucks increased their prices by 8%.

Operators are helping value-focused customers by offering rewards programs. About 80% said they would take advantage of a loyalty program if one were offered.

While prices are going up, menu items are going down, offering better control during a supply chain upheaval. As a result, approximately 60% of full-service operators reported offering fewer items on their menu than before the pandemic.

Of course, there’s more to the picture than runaway food prices and a supply chain crisis. Wages have also risen, up 10%, as operators try to entice workers to return.

The Top Challenges Remain

According to the State of the Industry Report, the top challenges remain fervently in place. About half of restaurant operators report that recruiting and retaining talent will be their number one challenge in 2022. In addition, about 80% of fine-dining operators said that they did not have enough employees to staff their restaurant adequately. In a close second, 78% of family-dining and 63% of quick-service and fast-casual also reported employee shortages.

In recent months, an incredible 96% reported critical food and beverage supply chain shortages or delays. As a result, restauranteurs have to plan ahead and develop alternatives as delays extend from weeks to months.

Rising Technology as a Solution

Over 80% of restaurant operators said that technology offered a competitive advantage. This technology often comes in the form of online ordering and mobile payments. AI voice-ordering technology, robots, and other automated equipment are sure to be making headlines as the restaurant space continues to transform and restauranteurs continue to demonstrate their resilience.

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