NJRHA survey finds economy is disrupting service across the industry
(This is a reprint from NJ Business Magazine, originally published 8/31/22)
Soaring costs of food and utilities, coupled with an ongoing hiring crisis, are among the key issues impacting the state’s restaurant industry, which is still recovering from shutdowns and guest capacity limitations during the COVID-19 pandemic, according to a new survey released by the New Jersey Restaurant and Hospitality Association (NJRHA).
These challenges, among others, are why 54% of New Jersey restaurant operators say business conditions are worse now than they were three months ago. This finding follows a June National Restaurant Association survey in which 43% of operators across the country said they think conditions will worsen in the next six months, which was the highest level of pessimism since 2008.
NJRHA President Dana Lancellotti said despite the economy’s impact on the industry as a whole, operators are still providing the best service possible to their patrons.
“Restaurant operators are masters at balancing adaptation and innovation to provide amazing service for their customers,” said Lancellotti. “While operators are more pessimistic about the economy, they aren’t letting that get in the way of serving great food, providing exceptional service, and creating a memorable experience.”
Approximately 95% of a restaurant’s sales dollars go to food, labor, and operating costs. While wholesale food prices have increased 16.3% in the last 12 months, menu prices have only risen 7.6%, according to the U.S. Bureau of Labor Statistics. As a result, profits are suffering.
According to the NRJHA survey, 83% of New Jersey restaurant operators say their restaurant is less profitable than it was in 2019.
In the new survey, 84% of operators said their total food and beverage costs are higher than they were in 2019 and many other expenses are up.
- 59% of operators say their total occupancy costs are higher than 2019
- 74% of operators say their total utility costs are higher
- 93% of operators say their other operating costs (supplies, G&A, etc.) are higher
“Consumers are watching prices rise faster in grocery stores than in restaurants, therefore see an increased value in spending their food budget in restaurants. However, inflation is still impacting the industry and is forcing operators to cut hours, change their menus, postpone expansions, and reduce third-party delivery,” said Lancellotti.
Pandemic debt has come due, and operators can’t pay
During the first two years of the pandemic, 65% of restaurants took on new loan debt to adjust business models and continue operating. According to new national data from the National Restaurant Association, the loans were a mix of forgivable government loans, government disaster loans, and private-sector loans.
“For many operators who received Economic Injury Disaster Loans (EIDL), the deferment period for payment will soon end and it will be an overwhelming challenge for a majority of them to begin repayment right now,” said Lancellotti. “The National Restaurant Association data shows that, of the operators who have not begun loan repayment, only 23% say they will be able to make principal and interest payments. Another 46% expect to be able to pay the principal, but not 30 months of accrued interest.”
Restaurants are slowly adding jobs to get back to pre-pandemic employment levels
A strong majority of restaurants are still actively seeking staff — even as they face the struggles of a slowing economy. Despite the industrywide increase of 74,000 jobs in July, 66% of New Jersey operators report not having enough employees to support customer demand, and 79% of operators say they will likely hire additional employees during the next six months, according to the survey.
- 63% of operators say their restaurant is currently more than 10% below necessary staffing levels.
- 86% of operators say their restaurant currently has job openings that are difficult to fill.
“We face the unique issue that hospitality is an in-person job,” Lancellotti said. “Unfortunately, our industry cannot take advantage of the growing work-from-home trend that other industries offer. Hospitality is a face-to-face business.”
However, Lancellotti remains optimistic the industry will recoup its workforce.
“The restaurant industry is built on hospitality, and to ensure we can provide the highest levels of service, we hire talented people,” Lancellotti said. “We know that many people have been reconsidering their careers recently, and we hope that they will look seriously at this industry. Restaurants have good-paying jobs available at every experience level for people from every background. And these jobs provide the skills necessary to be successful in any career, and in life.”
The National Restaurant Association Research Group conducted a survey of 4,200 restaurant operators July 14- Aug. 5, 2022. New Jersey responses were compiled to produce the state findings. Find a report of key New Jersey findings here and national findings here.
Again, this is a reprint from NJ Business Magazine. If you would like to contact them, and I recommend you do, you may do so here.