Restaurant Industry Insights

The Challenges the Restaurant Industry Faces as Spring Approaches

The restaurant industry has overcome some significant hurdles in recent years. In light of these challenges, the ones we face now would seem almost like a walk in the park if they weren’t so persistent. A few of the issues we face as spring approaches include: 

  • Reaching the limit of price hikes
  • Multiple labor issues
  • Liquor liability

Here, we’ll explore these concerns and how restaurant operators continue to demonstrate resiliency and creativity as they move forward, up and over the barriers they face.

Surging Restaurant Prices

In February 2024, CNN Business headlines read, “Surging restaurant prices are making dining out a luxury.” The article went on to say how it’s increasingly cheaper to eat at home, instead of dining out. Fortunately for our industry, going to a restaurant is about much more than having a good meal. It’s about the experience.

Still, there is that hard-to-define point when increasing prices results in diminished traffic. We know the tipping points that have resulted in rising menu prices, with wage hikes and food costs as two of the main motivators. A survey by Restaurant365 found that restaurant operators expect labor costs to increase by up to 5 percent in 2024. The survey revealed that over 60 percent of operators intend to raise prices this year. In 2023, that number reached over 80 percent.

Restaurants are helping their customers overcome price hikes and fit going out into their budget with loyalty programs, specials, and happy hours. Operators are optimizing the experience to ensure their customers see the value above and beyond food and beverages. 

They also monitor their competitors’ prices to ensure they don’t hike themselves out of the market. One way to accomplish this is through F&B Insights Menu Pricing. This platform gives you access to local and national menus, enabling you to stay abreast of changes and ensure you don’t affect demand.

Labor Woes Continue

Labor woes include continued shortages in the workforce and wage pressures. In January 2024, 22 U.S. states raised the minimum wage. Industries facing the biggest wage pressures include government, healthcare, and hospitality. With labor usually representing 25 to 35 percent of a restaurant’s revenue, increasing wages has placed a strain on budgets. 

About 38 percent of respondents in the previously mentioned survey ranked employee experience and retention as the greatest challenge in 2024. Sales volume came in second at 24 percent, and labor costs came in third at 18 percent. In the 2024 HUB Outlook, almost 75% of industry executives said labor pains have affected the vitality of their business, and over half have increased their employee recruitment. 

Restaurants are looking at flexible scheduling and enhanced benefits to entice employees to stay. A growing trend includes well-being benefits such as mental health counseling services and gym or yoga studio memberships. They are also closely examining their company culture, ensuring strong, open communication channels.

Liquor Liability

HUB also reported on increasing litigation under dram shop laws. These laws hold establishments liable when a visibly drunk customer who’s been served alcohol causes harm. The third-highest historical verdict was awarded to a family from Florida in 2022. Georgetown Partnership, owner of a Miami Bar, was ordered to pay about $95 million in damages when a drunk customer hit a car head-on, causing a death and severe traumatic brain injuries.

Because of this increasing cost, liquor liability insurance is on the rise. Property insurance is increasing as well, particularly in areas prone to floods, hurricanes, or wildfires. Restaurants and bars in South Carolina have taken the issue to legislators, stating that many will be forced to close due to skyrocketing liquor liability insurance costs and reduced coverage.

Restaurants are increasing training and documentation, practicing responsible alcohol service, and teaching servers and bartenders how to identify when it’s time to stop serving alcohol to a customer.

FAQS

Why is liquor liability so expensive?

Unless your restaurant or bar is in one of the six states without dram shop laws, liquor liability insurance costs are mounting because of the nuclear verdicts over violations. 

Why is there still a shortage of restaurant workers?

The shortage in the restaurant workforce continues for several reasons, including changing demographics, wages, and work schedules. Surprisingly, a survey by Toast in 2023 found the number one reason for staff turnovers was bad management.

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