Survey: Rising costs weaken restaurant recovery post-pandemic

The impact of inflated food prices is reaching beyond the grocery store; the vast majority (88%) of restaurant operators reported that their food and beverage costs are higher than they were pre-pandemic, per results of a July and August survey by the National Restaurant Association (NRA).

That’s in addition to higher labor, occupancy, utility and other operating costs.

Not surprisingly, rising costs have cut profits at restaurants. A whopping 85% of restaurant operators said their business is less profitable now than it was before the pandemic. Only 9% said profitability has remained the same.

To combat rising costs, most restaurant operators (91%) have raised menu prices in recent months. In May, NRA reported foodservice menu prices reached their highest 12-month increase in 41 years—an increase of 6.9%.

While raising menu prices can help restaurants mitigate higher costs, it’s also driving more consumers, who are also fighting rising costs on food, gas, housing and other items, to save money by eating at home more—and eating out less. Recent market research shows sales of food purchased at the grocery store and eaten at home are outpacing away-from-home food sales. That’s because, despite massive inflation at the grocery store, eating out still costs nearly 3.5 times more than food purchased at the grocery store.

Other popular strategies restaurants are employing to mitigate rising costs include changing menu items (65%), reducing hours of operation (60%), reducing the number of employees (40%) and not operating at full capacity (40%). Less than one-third of restaurants are postponing plans for hiring, incorporating more technology, eliminating third-party delivery services or adding surcharges to customer checks.

Struggling restaurants don’t expect their businesses to recover anytime soon. In fact, for many restaurant operators, business conditions continue to decline; nearly half (46%) said conditions are worse now than they were three months prior. Only 16% said conditions improved in the last three months.

Is recovery on the horizon? Only 12% of operators expect business will return to normal in the next seven to 12 months, and 41% think recovery is more than a year out.

Notably, nearly one-third (29%) don’t expect business conditions will ever return to normal.

In addition to the impact of rising costs, restaurant operators are facing unprecedented staffing shortages. The majority (65%) don’t have enough employees to meet consumer demand. A whopping 81% said they have job openings that are difficult to fill.