Restaurant Industry Overview & Analysis
Everything about the current situation in the restaurant industry is a direct result of the pandemic. Labor shortage, inflation, changing consumer behaviors, supply delays and shortages, finding quality staff—the list can go on for a while.
While some experts say that this year is the first year we’re “back to normal,” it’s evident that what we are actually adjusting to is a "new normal.”
But what exactly does the “new normal” look like?
The most significant change in restaurants is the implementation of technology.
Restaurants were classified as essential businesses during the pandemic. They had the job of feeding millions of people who had previously never cooked at home or could not go to the grocery store.
Restaurants took initiative and quickly rearranged their operating system to accommodate the government's new health guidelines. This meant using available technology to connect with and feed customers.
- Third-party delivery apps
- Online ordering systems
- QSR code menus
- Contactless payment and pickup
Even as restaurants reopened for indoor dining, people had come to rely on the new operating systems and voiced advocacy for their continued use. Especially if they still have concerns about COVID-19 and coming in contact with people.
The shift to using tech isn’t the only hurdle restaurants have faced and now must overcome.
We spoke with three restaurants and a cafe about the challenges they’ve confronted and how they overcame these obstacles.
Active Labor Shortages
Staffing issues began almost immediately as restaurants reopened their doors for delivery, takeaway, and outdoor dining.
With workers, more often than not, making bigger money staying at home, it was challenging to get employees back in the building.
Restaurants in the past year have begun incentivizing new workers with higher pay, sign-up bonuses, and benefits, but it hasn’t had the effect they were hoping for.
The current problem is most new hires have little to no experience.
New York City hotel chef Brian Schmidt said:
“It feels impossible to find skilled workers right now. When I’m hiring professional cooks, they should have their own knife sets, but most don’t seem to know what I’m talking about when I ask to see their knives.”
Chef Schmidt added, “I have to train them from the ground up. It’s a ton of work, but I need bodies in the kitchen. People who have real kitchen skills aren’t answering job ads.”
The hotel restaurant is French-themed casual dining, but because of the lack of experience from new hires, Chef Schmidt has been forced to scale back the menu, removing the more technical dishes and focusing on sandwiches and salads till the new team is up to task.
So where did the old guard of skilled workers go?
Many used the time off during the pandemic to develop new skills or pursue passions that landed them in different industries.
When asked for other reasons workers haven’t returned, they answered:
- Lack of childcare
- Taking care of loved ones
- Ongoing education
- Don’t feel safe returning to work
Historic Rise In Inflation
It’s not just unskilled workers that restaurants are being forced to pay more for. Inflation is ballooning gas, rent, food, utilities, and restaurant supplies.
Restaurants are responding by raising menu prices, but too much of a change can damage relationships with regulars and scare off new guests. It’s a delicate balance to strike, making back the cost of inflation without customers grumbling about the latest prices.
General manager of Horse Thief BBQ in downtown Los Angeles, Max Holloman, had this to say about inflation:
“Before the pandemic, I was able to buy brisket for $3.09 to $3.25 a pound. It went up to $5.89 at one point, and now it currently sits at $4.45 a pound. Last month I was able to get it for $4.25 a couple times.”
With the weight lost after trimming and smoking the brisket (the most popular item on the menu), the restaurant is lucky to break even after selling to customers.
“We’ve raised prices on the menu twice now, and customers so far have been cool about it, but this business model is no longer really sustainable at these prices.”
Having already removed several less popular items from the menu, Horse Thief is considering removing BBQ altogether to save money on food costs. Located in central DTLA, the restaurant is building a menu that caters to the lunch crowds that filter in from the businesses in the surrounding skyscrapers.
Horse Thief operates as a fast-casual restaurant, so they can run a skeleton crew to keep labor costs down, but with the removal of key menu items, they were also able to cut labor by having fewer prep shifts in the morning and only using a dishwasher for busy evening and lunch shifts.
It’s not just restaurants getting hit with inflation.
Customers also feel the rising cost of living, and many are compensating by not going out to eat as often.
When they do go out to eat, they might see new prices on their favorite menu items and think twice about ordering food—or they might not see their favorite dishes at all.
Supply chain issues are another reason menus are shrinking. It’s better to remove the item altogether than to constantly disappoint customers with the news of it being 86’d yet again.
Supply Chain Issues
With prices already rising, some food items are skyrocketing because of short supply.
Cargo ships are backed up outside of ports, waiting for extended periods to drop off goods. Over time the supply chain should improve, but change on a global scale is never quick.
We spoke with the kitchen manager from Golden Road in Grand Central Market, and she said they had to remove over three-quarters of their menu items because they couldn’t consistently get the product to build dishes.
“It started with chicken wings,” she said. “We had to take them off of the menu because they were never in stock, and when they did have a case to sell us, it cost $300. The price is down to $149, but that’s still ridiculous.”
She then said, “We’re working on creating a new menu. It won’t have as many options as the pre-pandemic menu, but it’ll at least have a burger, salads, and a few sandwiches.”
Sam Green, general manager of Fat & Flour in Los Angeles, a cafe/bakery, had similar problems when trying to offer milk alternatives with their coffee program.
“We weren’t able to get oat milk from Oatly for a long time. When it was finally back in stock, our purveyor would only sell a third of a case at a time. So many people needed oat milk that the only fair way to get it to everyone was to limit the quantity that we could buy. We would run out sometimes, but it’s better than not having it at all; our customers love it.”
It wasn’t until last week that Fat & Flour could order full cases of oat milk again.
“It’s getting better. Whatever they’re doing. I’m not hearing, ‘we’re out of stock’ like I was earlier,” said Green.
What’s happening is that demand is finally being met.
With consumers getting caught up on supplies, the mad rush to get limited products in people’s hands is slowing down. Ships are getting into port on schedule, and hopefully, prices will begin to fall.
The overall feeling is that things are getting better.
Instead of forcing the old model, restaurants are adapting to a new world, learning how to roll with the punches and make the best of a bad situation.
It’s excellent news that morale is staying high, but what do the numbers say?
21 Important Restaurant Industry Statistics
The restaurant industry was hit harder than probably any other sector in the last few years, but let's look at the numbers to see where we were and where we are going.
With inflation continuing to rise, restaurant operators are under pressure to find new ways to cut costs and stay afloat. It’s predicted that rates will lower over the coming year—fingers crossed that the worst is behind us.
- The US inflation rate increased to 9.1% in June 2022.
- Inflation will end this year at 8.0%, but it’s predicted to fall to 3.5% by the end of 2023.
- Inflation has caused more than 66% of restaurants to see a decline in sales.
- Wholesale food inflation was reported at 15.5% in August 2022. The highest since 1974.
- Year to date (August 2022), menu inflation is up 7.2%
It’s difficult to predict when or if industry employment will return to pre-pandemic levels as restaurants continue to look for servers, bartenders, cooks, and managers for every type of restaurant.
- As of August 2022, the industry remains down 633,000 positions, though that same month, it gained 18,000 new workers.
- The average cost for replacing a single frontline employee is $5,864. The most significant percentage, 54%, comes from lost productivity.
- 49% of restaurants use social media to find new workers.
- 33% of restauranteurs say they can only afford a 1-2 percent increase in minimum wage.
- The average number of days an employee stays at a new job is 110.
Restaurant Sales Statistics
Customers are returning to restaurants as sales continue to climb. But with increased operating costs due to higher labor, inflation, and supply chain issues, it’s difficult to determine if the coming year will be profitable.
- When going out to eat, 65% of customers prefer local independent restaurants over chains.
- The National Restaurant Association predicts that total annual sales will reach $898 billion, an increase of 12.4% from 2021
- Last year, 74% of restaurants saw an increase in profits.
- Online Food Delivery sector is estimated to reach $63 billion by the end of 2022.
- Limited service restaurants last year saw sales of $389.48 billion. A jump of 60 billion from the year before.
Restaurant Consumer Statistics
Customer spending habits have changed considerably in the last three years. People are turning to the internet when trying to find a place to eat for dine-in, pick-up, or delivery.
- 68% of people ordering delivery prefer to order food directly from the restaurant's website.
- The average American spends just under $3,000 a year on restaurants.
- 78% of millennials would rather spend money on an experience, like going out to eat, instead of on items.
- 54% of adults in America say buying takeout or delivery is essential to the way they live, including 72% of millennials and 66% of Gen Z adults.
- 77% of eaters will visit a restaurant’s website before going to eat or placing an order to go.
- 35% of diners are influenced by online reviews when deciding on a place to eat.
Most of this data comes from the last two years, which has been a very tumultuous time for everyone.
It’s easy to see some of this information as proof that things aren’t getting better, but when talking with restaurant employees, we get the sense that things are improving.
Shawn Zuzek, a Horse Thief employee, said, “It’s constantly getting busier, and now that we’ve rearranged our operation by cutting down staff, I’m actually making more in tips than I have since starting work.”
With the supply chain smoothing out, inflation’s prediction to lower, and industry new hires gaining more skills and experience, it feels that the end of 2022 could be a turning point for the restaurant industry.
7 Restaurant Trends Embraced By The Public
Based on these statistics, it’s easy to see that restaurant industry trends are leaning heavily on tech, and customers are connecting with an online presence now more than ever.
Other trends that are gaining popularity are health-focused menus and ghost kitchens. Let’s take a closer look at how tech trends, a healthy menu, and ghost kitchens are changing the industry.
Better User Experiences Via Technology
Customarily, the hospitality industry has been slow to adopt new technology. With thin margins and a large staff to train, purchasing and incorporating new tech into a restaurant can be expensive and daunting.
In March 2020, everything changed, and restaurants were forced to integrate tech or possibly not survive the coming years.
Once restaurateurs started using tech, like AI, to answer phone calls and FAQs, take reservations, and keep track of inventory, they quickly saw the benefits of their investment.
On the floor, customers can use QR codes to look at the menu quickly—servers can then use handheld POS devices to immediately send the kitchen orders instead of writing them on paper, then walking to a computer to put the order in, effectively doing the same task twice.
Each tool helps create a more streamlined experience for staff and customers.
Ticket times are faster, tables turn more quickly, inventory is accurate so you don’t run out of products, and servers have more time for face-to-face customer interactions.
Convenient Food Delivery
Delivery is a trend that is here to stay. People have grown accustomed to the convenience of ordering their favorite foods and having it brought to their front door.
Using delivery apps brings in new customers and allows you to sell more food. Let’s say your reservation book is filled for the night; delivery creates the opportunity to sell to more people, even during peak hours when your restaurant is completely full.
The current problem facing restaurants is the insanely high commission fees that third-party apps charge for using their delivery service.
Luckily, there are options to avoid the fees and keep 100% of the profits.
COVID-19 made this a staple in any restaurant operating during the pandemic.
When using handheld menus, eatery employees were required to wipe down the menus after each customer. It soon became apparent that using QR codes was a much better option.
Customers can look at the menu on their phones after scanning the QR code, limiting the amount of contact between employees and customers.
Customers can then order their food, review it to make sure it’s correct, and once it’s in the restaurant’s POS system, they receive a prompt to pay with a credit or debit card.
Cash does not work with this system.
Now that we have entered the “new norm,” some full-service restaurants are providing tableside service again and doing away with traditional menus altogether
QR code menus can help restaurant businesses by:
- Eliminating the need to print paper menus
- Save servers time from passing out and collecting menus
- Menu corrections (like specials or 86’d items) are easy to edit
- Giving guests peace of mind that they aren’t touching previously handled menu
Online Ordering Systems
As tech seeps deeper and deeper into the everyday operations of restaurants and the benefits bubble to the surface, some owners are realizing the power of an online ordering system.
An online ordering system can:
- Make receiving orders from your customers easier
- Be its own CRM system
- Track loyalty program data
- Free employees from taking phone orders
- Improve order accuracy
- Increase upsells
- Help with marketing
But the biggest benefit is its ability to track data and cash flow.
With data collected, you can see which menu items are most popular, see what hours your busiest and staff accordingly based on those times, use customer information to build loyalty programs, and see how cash flows in real-time.
Online ordering systems make day-to-day business so easy that it’s just a matter of time before most thriving restaurants use one.
Independent Restaurants With Online Brands
Everyone is going online to decide what to eat. If you don’t have a strong online presence, customers will skip over you and go to a competitor's restaurant instead.
Thousands of restaurants are focusing on building their online persona by:
- Using platforms like Instagram, TikTok, and Facebook
- Having a modern logo and font
- Using an intuitive online ordering system,
- Building an appealing website optimized for SEO
- Being consistent with marketing
The goal is to engage with and earn more from existing customers and to get in front of new customers. The only way to do this is to build your digital real estate.
We’ve all seen the shift in society's effort to live a healthier lifestyle. Even fast food restaurants and chain restaurants are trying to spin their products in a more positive light, offering salads and grilled items instead of fried foods.
As the population develops more chronic illnesses and people are educating themselves on the importance of healthy eating, the demand for unprocessed whole foods is soaring.
Giving people healthy menu options could bring in a more diverse crowd and invite customers who would typically avoid visiting.
Ghost Kitchens are the perfect example of new restaurant innovation during the pandemic.
These restaurants did away with the traditional brick-and-mortar dine-in experience and exist entirely online, only offering their food through delivery.
Ghost kitchens are brilliant because the demand for food delivery is so high, but they aren’t burdened with an expensive storefront location, a front-of-house staff, and overall operating costs.
Owners can cut costs further by using commissary kitchens (partnership kitchens) or incubator kitchens that use an existing restaurant’s kitchen during their off hours.
Ghost kitchens are here to stay because of delivery’s popularity and are a great option for budding chefs wanting to start a small business but don’t have the capital to afford a traditional storefront. If a ghost kitchen is popular enough, they can grow into offering a dine-in experience.
Outlook For 2023
Despite the rough statics for the last few years, it feels that the state of the restaurant industry is on the rise.
The supply chain is working out its kinks, inflation is predicted to lower over the next year, and while the forced use of technology to survive the pandemic was rushed and came with a steep learning curve, the benefits have been extraordinary—helping restaurants to reach and engage with more customers than ever before.
Our all-in-one-platform helps you take back control of your online presence, drive direct sales, save money on fees, and manage everything in one place. Schedule a demo to see the platform in action and discover why our new restaurant partners increase online sales by an average of 270% in their first three months using Owner.com.Schedule A Demo