The U.S. restaurant industry is expected to hit $898 billion in sales this year, returning to the trajectory of the pre-COVID pandemic, the National Restaurant Association said in its 2022 State of the Restaurant Industry Report. published on Tuesday.
The Washington, DC-based association in the new report available for download, noted that foodservice sales remain, in inflation-adjusted dollars, about 11% below what they were before the declaration of the COVID-19 pandemic in March 2020.
“What we did this year was include a deflated look at total industry sales because menu price inflation has operated at such an aggressive pace during the pandemic,” said Hudson Riehle, senior vice president of the association’s research and knowledge group, in an interview on Monday. “When you deflate it in terms of real earnings, it’s still down well over 11%. This is still a considerable number.
Wholesale food costs rose 7.9% in 2021 and hourly labor costs at restaurants and drinking places rose about 8.6% for the year, a- he declared.
Two years ago, the association predicted in late February 2020 that the industry would hit $889 billion in sales in 2020, an expected 4% increase from $864 billion in 2019. But pandemic restrictions have stifled sales in 2020 and 2021, and many of the effects persist this year.
The association released a mid-year report in August last year which predicted sales would reach $789 billion in 2021, up nearly 20% from 2020. This increase was bolstered by a increased consumer confidence, pent up desire and people returning to work.
Riehle said 2022 sales will be better than 2021, even though the last half of the past year has seen consumers pull back, a trend that spread in January.
“It’s still the year of transition,” Riehle said of 2022, “but the path is directionally correct.”
Among the other landmarks expected this year:
– The restaurant industry workforce is expected to grow by 400,000 jobs, for total industry employment of 14.9 million by the end of 2022.
– More than half of restaurant owners surveyed said it would take a year or more before business conditions return to normal. They also expect food, labor and occupancy costs to remain high and continue to impact profit margins in 2022.
– 96% of operators experienced supply delays or shortages of essential food or beverages in 2021 and expect these challenges to continue in 2022.
– Pent-up demand for dining out has increased, with 51% of adults surveyed saying they don’t eat out as often as they would like – a six percentage point increase from before the pandemic.
“The restaurant and catering industry has adapted and continues with absolute resilience, so we are optimistic about the path to recovery over the coming year,” said Marvin Irby, President and acting chief executive of the National Restaurant Association, in a statement. “We still have work to do to ensure that the operators who struggle the most can survive.”
Riehle noted that consumers are showing a willingness to spend money in the industry.
“Operators are resourceful enough to quickly not only develop new business models, but also exploit large and emerging demographic differences,” he said.
Differences in how age groups expect to use restaurants in the future were dramatic, with younger Gen Z and Millennial customers expecting restaurants to offer new offerings, Riehle said.
These offerings, he said, “could be alcohol to take away. It can be outdoor dining. These can include meal subscriptions, even meal kits, loyalty programs, use of technology, and eco-friendly packaging. »
“The way they use restaurants, what they expect from restaurants, is radically, radically different from Gen Xers and baby boomers,” Riehle noted.
The association’s report found that more than eight in 10 operators said technology in a restaurant provided a competitive advantage, whether it was ordering smartphone apps, reservations, mobile payment or delivery management.
Operators expect staffing to remain a challenge. While the restaurant and catering industry added 1.7 million jobs in 2021 for a total of 14.5 million employees at the end of the year, seven out of 10 operators in all major segments reported being severely understaffed. The association said this will continue to limit industry growth in 2022.
The association said that between 2023 and 2030, the industry is expected to create an average of 200,000 jobs each year, with total workforces reaching 16.5 million by 2030.
Restaurant traffic “has suffered tremendously over this two-year period,” Riehle said. “And because of the higher inflationary environment, that puts considerable pressure on profitability.”
Recent association surveys found that four in five restaurateurs said they were less profitable now than they were before the pandemic, Riehle said. “And the margins weren’t that big before the pandemic for the typical restaurateur. It was 3% to 6% of sales. So even before the pandemic, there wasn’t much maneuverability to deal with higher input costs. »
The resilience of operators has been on full display during the pandemic, Riehle said, adding, “The way they have survived and adapted in this environment is herculean.”
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