After restaurants were forced to close their doors for in-person dining due to closures and many small businesses were forced to shut down altogether, the industry is booming again despite crippling inflation and economic fears.
Entrepreneur and “Bar Rescue” host Jon Taffer argues that restaurants are locked in a new post-pandemic struggle despite rising profits and steady customer visits.
“We’re really fighting this reinvention of our business,” Taffer said Thursday on Cavuto: Coast to Coast.
Customers continue to flock to the restaurants, which keeps demand high. January consumer spending data showed that food & beverage outlets posted the largest gains, with sales rising 7.2% over the past month.
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However, many restaurants cannot keep up with demand and are making necessary adjustments due to inflation and staff shortages.
“Revenue is up about 20% from pre-pandemic levels, which is fantastic. But we don’t have the staff,” said Taffer. “We fight with the prices. Also, we don’t get the same specification, which means a chicken breast comes in a different size every time.”
“But that’s no small matter,” Taffer continued. “Now it doesn’t fit properly on a bun. It takes longer to cook. You don’t know how to cook it. These things have really changed the way we work.”
“We’re really fighting this reinvention of our business.” Jon Taffer
According to a recent report by the National Restaurant Association, since January half of restaurant operators in the US expect to make less profit in the new year.
The National Restaurant Association’s survey of business conditions underscored that “the trifecta of higher food costs, labor costs and energy/utility costs” remains a significant challenge for the majority of establishments already operating on low margins.
“The restaurateur is in a box,” Taffer explained, noting the pressure that inflation is putting on business owners. “If I can sell a $12 hamburger but can’t sell an $18 hamburger because my market doesn’t allow it, then I can’t charge $18. I need to reduce the size of the burger. So I have a choice, either I increase my prices or I adjust my product to the current price point. Many restaurants cannot raise this price point. Their elasticity only goes so far. So that’s a challenge.”
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Data from the National Restaurant Association’s Business Conditions Survey showed that nearly 90% of restaurants have increased menu prices. Fifty-nine percent have changed the food and drinks offered on their menus and 48 percent have reduced their hours of operation. Just over 30% of closed positions have closed on days they are normally open, and another 19% have even postponed hiring plans.
While observing that restaurants have a price problem, Taffer noted that in many cases, eating out in restaurants offers “good value” compared to buying groceries.
The Bureau of Labor Statistics monthly consumer price index (CPI) for January, released last week, showed that home food prices – the classification for food that is store-bought and prepared at home – fell 11.3% year-on-year. have risen.
In contrast, the CPI data reported that “eating out” was up just 8.2%.
“Now a restaurant still costs more for the hamburger than the raw meat,” Taffer said. “But from a value perception perspective, restaurants today offer value for money.”
In addition to inflation, restaurants are waging a war against employees and potential employees, who, Taffer warns, have the ability to cost restaurants customers and sales.
“We used to define the standards, and they met those standards. Now we need to scale down those standards to match the staff we can find,” he said. “It’s scary. This is a formula for failure.”
Employers added 517,000 jobs in January, the Labor Department said in its monthly payroll report released last Friday, far exceeding the 185,000 jobs forecast by Refinitiv economists. It was the best month for job creation since July.
The unemployment rate, meanwhile, fell unexpectedly to 3.4%, its lowest level since 1969.
Bars and restaurants accounted for the majority of these increases, adding 98,600 new workers in January.
Despite positive growth, Taffer noted that employers are still struggling to hire and retain employees, which he attributes to “hesitancy” in the industry.
“The big thing that I think affects us the most is that hesitancy,” Taffer said. “I see hesitancy in all small business owners because of the economic environment that we’re in, the human resources environment that we’re in today.”
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“They’re scared of getting involved in marketing plans, they’re scared of getting involved in promotions, they’re scared of their employees. We can’t have turnover. We can’t keep the employees we have. There’s that general fear, that provisionalness out there,” he added.
“Even though the restaurants are full, we are not taking the opportunity as we should.”
FOX Business’ Daniella Genovese, Megan Henney, and Eric Revell contributed to this report.