Operators find ways to offset higher costs

In the Association’s most recent survey on business conditions (July 14 –Aug. 5), almost nine in 10 restaurant operators (88%) reported that their food and beverage costs are higher than they were in 2019, before pandemic-related supply-chain issues emerged. 

But higher food costs aren’t an isolated problem. Fully 86% of operators report that their labor costs are higher, even though 62% say their staff numbers are below needed levels. 

What’s more, 80% say their utility costs are up, 65% say the same about occupancy costs, and almost everyone (94%) has seen increases in other operating costs (such as supplies and general administrative expenses). 

Not surprisingly, all these rising input prices have taken a toll on the bottom line: 85% of respondents report that their restaurant is less profitable now than in 2019, before the pandemic.

What are operators doing to cope? 

• Almost all restaurants included in the survey (91%) raised menu prices, and two-thirds (65%) made alterations to the menu. 
• Six in 10 reduced hours on the days they were open. (Almost four in 10, or 38%, began closing on days that they previously were open.)
• Other frequently mentioned adaptations: postponing expansion plans (44%), reducing employee count (40%) and operating at less than-full-capacity (40%). 
• One adjustment that’s far less common: fees or surcharges. Only 16% of operators say their restaurant is currently adding these to the check. But this policy isn’t going away soon: 75% of the restaurants who are adding a surcharge expect to keep that policy for more than a year.

Borrowing is another way to get through a tough period. Two-thirds of the operators surveyed (65%) report that they’ve taken on new debt since the beginning of the pandemic. Six in 10 took advantage of the federal Paycheck Protection Program and nearly half took on an Economic Injury Disaster Loan (EIDL) from the Small Business Administration or a participating lender. Beyond these federally funded programs, three in 10 restaurateurs got a private-sector loan, such as a bank or credit-card loan. 

EIDL loans in particular remain big debts; of EIDL borrowers, 9% have already paid off their loan and 10% currently owe less than $50,000, but 

• 44% owe $50,000 to just under $200,000
• 31% are still out for $200,000 to just under $1 million
• 6% owe $1 million or more 

Payments are deferred for the first two years of the loan, but once the payback period begins, 77% of EIDL recipients expect that they will not be able to make their payments on interest, principal or both in a timely manner.

Despite all these challenges, there are signs that restaurateurs are hopeful for the future: 84% say they will likely hire new staff over the next six months, providing there are qualified applicants available. 

But operators are also learning to adjust to what they see as a new normal. Four out of 10 think it will take another year before business conditions return to the prior norm, and 29% believe that the pre-pandemic norm will never return. In other words: change is now the only constant.

Share our Infographic on the latest survey results