Restaurants’ headwinds include labor, inflation, but pent-up demand in their favor

Restaurant operators face significant challenges – especially finding enough employees – but have pent-up dining demand in their favor, according to B. Hudson Riehle, senior vice president of the National Restaurant Association Research and Knowledge Group.

Restaurants’ labor costs are running at the highest rate in more than 40 years, Riehle said at the National Fisheries Institute’s Global Seafood Market Conference (GSMC) in Orlando, Florida, U.S.A., on Wednesday, 19 January.

Since August 2021, restaurant employment has been sagging, Riehle said, noting that the overall U.S. economy is down 3.6 million jobs as of December 2021 compared to pre-pandemic levels.

In a December NRA survey, 61 percent of restaurant operators said recruiting employees was their biggest challenge, followed by 20 percent who said the cost of food was the biggest issue they are facing. Only 6 percent said coronavirus was their top challenge.

Due to soaring food costs, menu prices rose 4.5 percent last year – the highest rate since 2008, according to Riehle. Protein costs have risen from 20 to 30 percent or more over the past year, he added. Input costs are not expected to change until well into the second half of 2022, according to Riehle.

However, there is significant pent-up demand for on-premises dining.

“The one salvation is that users want to use the industry,” Riehle said.

While on-premises dining dropped 19 percent from February 2020 to November 2021, off-promises dining soared 20 percent. And NRA’s early December poll found 51 percent of survey-takers said they are not using on-premises dining as much as they would like, and 37 percent said they are not using takeout or delivery as much as they would like.

“The reason off-premises can flourish in this environment has to do with a fundamental difference now that wasn’t available to the industry five years ago, and that is new technological solutions,” Riehle said. "Digital capability has dramatically increased the ability for consumers to have on-demand meal solutions.”

In addition to consumers’ increased demand for socialization, there is a “substantially heightened” demand for convenience, Riehle said. Because of this, Riehle said, value-added products for off-premises consumption have a future.

"Over a third of American consumers … say there is not enough technology. They’re looking for even more convenient delivery and takeout,” he said.

While Riehle said the seafood industry has an opportunity to grow its share on restaurant operators’ menus this year, the NRA survey found the category faces numerous challenges. The primary reason consumers don’t order seafood at restaurants is because they do not eat it (32 percent), followed by “too expensive” (27 percent), they prefer to prepare it at home (21 percent), and “there is a lack of appealing seafood on the menu” (8 percent).

The survey found 47 percent of consumers say price is their most-important consideration when ordering seafood, followed by harvest method (23 percent), origin (19 percent), and sustainability certifications (12 percent).

“Their most-important consideration in the end does remain price,” Riehle said.

Seventy-three percent of Americans said the survey they order seafood dishes at restaurants because of its taste, while 35 percent say health benefits are important, and 30 percent order seafood because they are dining at a seafood-specific restaurant.

The majority of restaurant customers – 33 percent – order shrimp, followed by salmon, crab, tuna, lobster, and catfish.

Despite the bevy of challenges buffeting the U.S. restaurant industry, Americans retain a positive view of it, Riehle said.

Photo courtesy of YES Market Media/Shutterstock