Foodservice industry’s fragile recovery falters amid rising spending and labor shortage | Business

After a brief glimpse into normalcy this summer, the fragile recovery of the US restaurant industry is faltering.

Data and interviews with restaurateurs indicate a deterioration in finances due to soaring costs for everything from salmon to uniforms and labor shortages. A survey found that 51% of small restaurants in the country could not pay their rent in September, up from 40% in July.

Unlike most of 2020, today’s struggles aren’t visible to the naked eye: customers still flock to restaurants, for the most part, despite rising prices and lingering fears of the variant of the coronavirus delta. But the anxiety over the increased spending is palpable among New York restaurateurs in Nashville, Tenn.

“You can see a restaurant doing well on a Friday night, but that doesn’t tell at all how they are doing. Probably not good, ”said Daisuke Utagawa, a Washington, DC chef whose restaurants include Haikan and Daikaya. “For us, personally, we haven’t seen any kind of recovery. We are still underwater.

The industry is sounding the alarm bells. Its main lobbying group last week called on Congress for more help to help cover payrolls and pay down debt, citing a survey showing that a majority of restaurateurs saw business conditions deteriorate over the course of the year. the last three months. Like many businesses around the world, restaurant businesses are also affected by supply chain bottlenecks.

Highlighting the spike in spending, a closely watched price gauge hit its highest level since 1991 in August, driven by energy and food, the Commerce Department said on Friday.

“Our kitchen labor costs have increased by 20%, maybe more,” said Jeff Katz, partner at Crown Shy and Saga in New York City. “The question is how much more can the customer handle. We haven’t increased our prices yet, but these costs are real.

The rebound has been fragile and uneven across the country, even for national channels.

Darden Restaurants Inc., which has about 870 Olive Garden locations, said last week that sales rebounded slightly in September after falling in August. Georgia and Florida have come under pressure from the Delta variant in recent weeks, chief executive Gene Lee said on a conference call. But locations in California are improving.

Major publicly traded companies, including Chipotle Mexican Grill and McDonald’s, are expected to release quarterly results in October. While the recovery in fast food has been stronger, with sales sustained through drive-thru and take-out options, costs and a lack of workers are eating into profitability.

“The biggest obstacle is the sheer availability of labor,” said Lauren Silberman, analyst at Credit Suisse. “All of this weighs on the margins.

As winter approaches, with COVID-19 still spreading in parts of the United States, some customers may be more reluctant to frequent indoor locations. But one of the biggest concerns for restaurateurs today is the shortage of cooks and waiters, many of whom do not want to return to the industry despite higher wages.

“It’s a constant increase and you still can’t find people,” said Danny Abrams, owner of Mermaid Inn restaurants in Manhattan. “I had an Italian restaurant, Sirenetta, on the Upper West Side. I cannot reopen because I cannot find an Italian chef, I cannot find a staff.

Sit-down restaurants are particularly affected, with employment still 500,000 jobs below pre-pandemic levels. Shrinking staff and high turnover have hampered customer service, with customers complaining about inexperienced staff and wait times.

Many restaurateurs have raised menu prices and consumers are starting to notice this. Nearly two-thirds of customers say they order less or visit restaurants less often because of price increases, according to an August survey by Bluedot, a geolocation software company.

Yet nationwide sales have remained strong since the economy reopened and Americans, many of whom have been vaccinated and racked up savings accumulated from long months of isolation, have flocked to restaurants and pubs. .

Spending at quick and full-service restaurants was up 7% from 2019, according to data from the Rewards Network loyalty program. The number of customers is declining, however, which means that part of the dollar gain is due to rising menu prices.

“This is going to be exciting for us, we anticipate another fall and winter of uncertainty,” Abrams said. “We’re not out of the woods at all.”

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