Nearly half of Connecticut restaurateurs — 43% — say business conditions are worse now than they were three months ago, according to survey results released last month by the Connecticut Restaurant Association.
It comes at a time when despair over the future of the industry is the highest nationwide since 2008, the peak year of the Great Recession, according to a separate report. report published this summer by the National Restaurant Association. The report says the same percentage – 43% – of restaurateurs nationwide believe conditions will worsen by the new year.
“While growing economic pessimism among traders does not guarantee an imminent recession, it has reached a level that requires close monitoring,” the NRA report said.
In the ARC survey, comparing 2022 spending to 2019 spending, 84% of Connecticut restaurant owners say food and beverage costs are higher, 69% say occupancy costs are higher, 86% say utility costs are higher and 94% say other operating costs are higher.
Scott Dolch, president and CEO of ARC, said the angst and continued struggles of restaurateurs may seem counterintuitive at a time when the pandemic is perceived to be on the wane and increasingly people feel comfortable eating in restaurants.
“What we’re seeing right now is a positive thing, people supporting restaurants. But the negative side is the cost of running a business in our industry,” Dolch said. “Over the past 12 months, food costs have increased by 16% and menu costs have only increased by 7.6%. And that’s not even mentioning labor and utilities.
Tim Adams, co-owner of J. Timothy’s Taverne in Plainville, said the ARC poll “indicates what everyone already knew.”
“We see customers wanting out, but the contradiction is the inflation we see,” he said. “Our biggest problem is having enough people to cook the meals that customers want. But then there’s the overall expense of everything – utilities, labor, operations, paper bags , etc. – all this costs more.
Dolch added that restaurateurs risk losing customer loyalty if they raise menu prices to the same level as food prices.
“It would be sticker shock,” he said. “They would lose some of their guests, maybe this family of four that goes out twice a month will go to once a month. Plus they compete with neighboring restaurants and what they charge.
Adams said he had long put off raising menu prices. As a result, “we spent several months with negative cash flow,” he said.
He said the price increase was “probably the hardest thing I’ve ever done…but at least we now have positive cash flow, although we’re not running to the bank in any way. “.
In good times, the average profit margin for restaurants nationwide ranges from 4% to 6%. Today, cost increases are reducing this margin to almost 0%. The survey reported that 85% of Connecticut restaurant owners say their business is less profitable than in 2019.
“Restaurants are doing everything they can. I hear them telling me at the end of the week or month that I’m barely breaking even. They don’t see the light at the end of this tunnel. They don’t think inflation is going down. They worry about fall and winter when they lose their outdoor meals,” Dolch said.
Chris Prosperi, owner of Metro Bis in Simsbury, isn’t pessimistic about his future. Metro Bis has converted its menu to prix fixe only. Two-course lunches are $30 and three-course dinners are $60 excluding tax and tip, and $10 more if you want a pre-meal bread basket. It is booming.
“It saved us. I haven’t changed and I don’t think I will ever change,” he said. “It’s easier than changing the prices on the menu all the time.”
Prosperi thinks restaurateurs would be less pessimistic about the future if they did what they instinctively don’t want to do: raise menu prices, and not just a little, to keep their heads above water at a when costs are rising rapidly.
“When was the last time [restaurateurs] increased our prices to match current prices? ” he said. “They have to go up a lot more, otherwise you’ll see a lot of [restaurants] go out. It would be a shame because there is no reason for it.
Restaurants generally don’t want to raise prices, he said, because of customer refusal. But if they don’t, he said, their profit margin will shrink even further. They can justify the increased cost to customers by remembering what the restaurants are for, he said.
“Restaurants aren’t so much about food as they are about gathering. Why do you go out to eat? Just because you don’t want to be home? Or is it because you want to see your friends and family and share this time around a meal?” he said. “I think we need it more than ever. … I see it when I spend time in the dining room. People are happy to be together.”
The CRA survey revealed that other expenses will soon be added. The National Restaurant Association reports that 59% of business owners have taken out repayable loans through the Paycheck Protection Program, 48% have taken out an Economic Disaster Disaster Loan (EIDL) from the US Small Business Administration or a lending partner and 31% took out a loan from the private sector. ready.
The payment deferral period for EIDLs will end soon. Dolch said the national numbers are grim, even with a favorable interest rate just below 4%.
“Among operators who have not started repaying their loan, only 23% say they will be able to repay principal and interest. 46% expect to be able to pay the principal, but not 30 months of accrued interest,” he said.
Forgiveness of EIDL loans, he said, did not appear likely.
“In our industry alone, there were $370 billion in EIDL loans. They’re not going to forgive those loans,” he said. need that interest? We don’t want to see those loans default.
The current staff crisis is also aggravating stress for restaurateurs. The ARC survey found that 59% of Connecticut restaurant owners don’t have enough employees to meet customer demand, 75% say they’ll likely hire more employees within six months, but 80% say their restaurant has hard-to-fill openings.
Adams said he was still mystified by his popular restaurant’s inability to hire enough staff.
“I thought I was optimistic last year around this time when I predicted that people after the Super Bowl would come out of unemployment and we would see a break. That didn’t happen,” he said. he declared, referring to one of the busiest days of the year at the restaurant famous for its chicken wings.
“I still haven’t seen it happen. I’m not as optimistic as I would like. I really don’t understand what happened, where the people are. I haven’t spoken to anyone yet who can give me that answer,” he said.
Billy Grant, owner of Bricco in West Hartford and Bricco Trattoria in Glastonbury, said that despite the high cost of “everything” and supply chain issues that add weeks to replacing faulty equipment, his biggest concern is difficulty recruiting new workers.
“The cost of labor has increased because I use so many overtime hours. I do not have a choice. I don’t have enough cooks. And I’m a practical guy. I have a bad burn on my arm because I always cook. And for at least two hours every Friday, I do the dishes,” he said. “I never imagined that after 27 years I would still work as hard as I do.”
Nevertheless, he said, he feels “blessed”.
“I have restaurants in two good locations,” Grant said.
The industry gloom that has accompanied the pandemic is also seeping into college catering training programs.
Last year, Sacred Heart University in Fairfield stopped accepting new students into its hospitality and tourism management program. SHU will close the program once all current students graduate, program coordinator Kirsten Tripoldi said.
“The pandemic killed us too,” she said.
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Tripoldi said parents’ concerns for their children’s career futures are a big factor in the program’s “decline”.
“Parents want their kids, after getting an expensive degree, to have a career path and money to pay off student loans,” Tripoldi said.
Tripoldi, who sits on the board of directors of the International Council of Hospitality, Restaurant and Institutional Educators, acknowledged that the closure of the SHU program was also due to marketing errors. But she added that many college hospitality programs are at historic low numbers.
“A good number are at 40% enrollment compared to four or five years ago,” she said.
Jan Jones, coordinator of the hospitality and tourism management program at the University of New Haven, said colleges and the restaurant industry must “be innovative” to persuade people that careers in catering are desirable.
“A lot of people started seeing these kinds of jobs as long hours and low pay and they kept finding other positions that didn’t have the same expectations. It’s sad,” Jones said.
Susan Dunne can be contacted at [email protected].