After two dire years, the American restaurant industry is staging a gradual comeback. According to the National Restaurant Association, the food service and restaurant industry recorded sales of $789 billion in 2021, up from $656 billion. Indeed, this is significant growth, but it pales in comparison with pre-pandemic sales of over $860 billion.
Although revenues in the restaurant industry seem to be on an upward trajectory, numerous challenges are limiting gains. The restaurants that are surviving and growing have adapted well to the new state of things. In order to assess how your restaurant should adapt, it is important to consider the inhibiting variables.
Changes in Consumer Behavior
There has been a significant change in consumer spending patterns in recent years. The Covid-19 pandemic only worsened the situation. People are no longer spending money as they used to do in years gone by. This has seen restaurants recording fewer reservations, translating into lower revenues. Typically, restaurants require a reservation rate of over 40% to break even. Currently, the figure stands at 20%, which means operators are making less money from their businesses.
Labor Shortages Intensify
The restaurant industry isn’t the only one navigating the labor crunch because it cuts across the board. Over the past year, staffing has grown, but there’s still a biting labor shortage. 75% of restaurant operators point out that recruiting and retaining employees is their top business challenge. That also applies to vendors such as restaurant laundry services because they have taken a hit.
In the past year, restaurant owners have had to contend with higher business expenses resulting from government-related hygiene regulations and other factors. Operators have been forced to outsource tasks such as the bulk cleaning of linens, uniforms, and kitchen aprons rather than having an in-house laundry operation. Today, hiring a restaurant laundry service is standard procedure. Though beneficial, such expenses increase the cost of running a business.
Supply Chain Challenges
The global supply chain got significantly disrupted in 2020 and 2021. The restaurant supply chain, in particular, experienced high demand, manufacturing delays, and extreme weather events, among other challenges. These caused worldwide shortages whose effects continue to be felt today. Major supply chain hubs still experience backlogs that will take a while to clear.
The direct consequence of these supply chain challenges is that restaurants will generate cash flow rather than profit. Long waits for mission-critical products means restaurants won’t be able to get all products they need. If they do, the supplies are likely to be too expensive and eat into their profits. The ever-looming threat of renewed lockdowns will only make things worse.
Final Note: What’s The Way Forward?
The restaurant industry faces significant challenges. The bulk of these challenges existed pre-pandemic, but COVID-19 worsened the situation. Whether it is recruitment challenges, rising costs, or changes in consumer demand, restaurant owners have a lot to deal with.
If your restaurant has survived what’s likely to be the most challenging phase you could ever imagine, you’re undoubtedly ready to thrive in the post-pandemic world. Now is the time for innovation. Streamlining processes and adjusting for the new world we live in are the markers of future success.