Restaurant Recovery Fried As "Business Conditions Worse Now Than Three Months Ago"

Tyler Durden's Photo
by Tyler Durden
Sunday, Oct 03, 2021 - 09:20 PM

The National Restaurant Association (NRA) penned a letter to Speaker Pelosi, Leaders Chuck Schumer, Kevin McCarthy, and Mitch McConnell about the restaurant industry's dire situation heading into the fall season. 

NRA said the "struggling restaurant industry is of grave concern to us." The association included a new survey of the industry's economic conditions and concluded the "state a recovery from the pandemic will be prolonged well into 2022." They warned: "the majority of full-service and limited-service operators say business conditions are worse now than three months ago." 

The findings below are on the heels of soaring food inflation, labor shortages, and logistical nightmares that have made some restaurant items nearly impossible to obtain. 

  • 78% of operators say their restaurant experienced a decline in customer demand for indoor, on-premises dining in recent weeks because of the delta variant spike. 

  • 63% of operators said their sales volume in August, historically one of the busiest months for restaurants, was lower than it was in August 2019. 

  • Costs are up – 91% of operators are paying more for food; 84% have higher labor costs; 63% are paying higher occupancy costs, but profitability is down – 85% of operators reported smaller margins than before the pandemic.

  • Although the industry has added back many of the jobs lost during the pandemic, 78% of operators say their restaurant doesn't have enough employees to support current customer demand.

  • 95% of restaurant operators say their restaurant experienced supply delays or shortages of key food or beverage items during the past three months.

The new findings paint a grim economic backdrop for President Biden's "Build Back Better" plan and suggest the stagflation is begging to bite. After all, more and more economists are warning about the increasing risk of 1970s-style stagflation, the latest to warn was Stephen Roach

A separate study by small business networking site Alignable, conducted between Aug. 28 and Sept. 27, found that most restaurants (51%) were unable to cover their September rent

Both studies suggest the return to normalcy for restaurants is puttering out as deterioration in finances due to surging costs, labor shortages, and a decline in traffic may indicate another round of restaurant busts are ahead.