Restaurant sales

Prices and supply issues threaten restaurant sales

As winter approaches, headwinds in all parts of the catering operations come together to create a perfect blizzard for operators. Between supply chain challenges, consequent increases in food prices, labor difficulties and the emergence of the omicron variant, restaurants will have to work hard to retain their customers.

Food shortages and price increases have become so pronounced that on Monday (November 29), President Biden included four supermarket executives – those from Walmart, Kroger, Food Lion and Todos Supermarket – among 10 participants in a meeting to discuss supply chain challenges. . Also on Monday, the Federal Trade Commission (FTC) announced it is investigating these challenges, asking retailers and wholesalers to share inside information to help understand the sources of the price increases.

Prices for out-of-home food are actually increasing slightly less in response to these challenges than those for in-home food, a 5.3% year-over-year increase in October 2021 from 5.4%, according to the US Bureau of Labor Statistics (BLS) consumer price index. . However, since preparing food at home is generally more affordable than eating out, price increases can send cost-conscious consumers to the grocery store where they might otherwise have eaten out, especially more than menu prices increase.

Last week (November 23), for example, Darin Harris, CEO of San Diego, Calif. Based quick service restaurant chain (QSR), Jack in the Box, which has more than 2,200 stores in 21 states and in Guam, said the company expects menu price increases. In early November, Bloomin ‘Brands, parent company of Outback Steakhouse among other casual dining chains, announced its first price increase since 2019, predicting that commodity costs would rise 10% next year. At the end of October, McDonald’s CEO Chris Kempczinski said prices were up about 6% year-on-year.

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Meanwhile, restaurants face a historically competitive job market, with fewer people in the workforce even as the rise in digital orders has increased the amount of food restaurants must produce and put in between. the hands of customers. A BLS study found that in September, the most recent month reported, quit rates in the accommodation and food services industry rose 40% year over year, and job opening rates have more than doubled. Additionally, the Office’s Employment and Unemployment report for October found that there were 11.5 million employees in food services and drinking places, 5% from the same period in 2019.

Now, with the omicron variant fueling contagion issues again, on-site catering business is under threat. While alfresco dining has been an effective way for restaurants to keep some sales onsite in the warmer months in the face of contagion issues, colder temperatures threaten this stopgap measure.

In fact, restaurants with table service would lose nearly 40% of their sales. Research of the 2021 PYMNTS Restaurant Readiness Index, created in collaboration with Paytronix, finds that 27% of these restaurants’ sales come from their dining-room businesses and 12% from on-site outdoor dining. Even after a few extremely difficult years, the challenges are far from over for the restaurant industry.

For more: Late investment in QSR loyalty hurts innovation and sales

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