The last two years have been difficult for the restaurant industry; unable to open for a good portion of that time. However, things are slowly changing. With over 64 per cent of the American population vaccinated, much of the country is open again and freely allowing customers to sit in and dine.
However, the last two years have changed the way many think, and altered people’s expectations of restaurants. Contactless delivery and ordering have become the norm, and many customers expect there to be a loyalty program in place for their favorite brand.
Digitization has helped many brands reduce costs and increase operational efficiency. This also saves on the labor required, a big advantage in a time when foodservice workers are quitting in great numbers and business owners are struggling to retain them. Supply chain issues have plagued restaurant owners too, and they ought to expect more of the same in 2022.
Ultimately, the industry has made great strides in the last two years, but simply hasn’t gone back to pre-COVID-19 levels yet.
Key findings
- Sales in the industry should reach $898bn this year, returning to the pre-COVID-19 trajectory
- Foodservice sales, adjusted for inflation, are about 11 per cent below figures for March 2020
- Wholesale food costs were up 7.9 per cent in 2021 and hourly labor costs were up 8.6 per cent for the year
- The foodservice industry is expected to grow by 400,000 workers in 2022
- 96 per cent of operators experienced supply delays or shortages of key ingredients in 2021, and expect the same in 2022.
The American restaurant industry is still a behemoth and a significant part of the economy. It has undoubtedly suffered during the last two years, and it still hasn’t recovered to pre-COVID-19 levels.
“If we look at the trends over the course of the pandemic, it is clear that franchised businesses as a whole are greatly contributing to the U.S. economic recovery,” said Dan Rowe, CEO of Fransmart.
“According to research compiled by the International Franchise Association (IFA) in collaboration with franchise market research and consulting company FRANdata, franchise businesses contributed $670bn of economic output into the U.S. economy in 2020 and represented three per cent of the total nominal GDP.”
How does the industry see the report?
While COVID-19 registered a blip on F&B’s ride to glory, the journey goes on. It’s an irrepressible industry.
“Overall restaurant sales are expected to reach $800bn this year, on its way to a trillion dollars,” said Rowe.
“Statista notes that U.S. quick-service restaurant (QSR) industry’s output has increased by over 50 percent since 2007, reaching an all-time high of approximately $283bn in 2020.”
Government support was a hot topic for many restaurants, as they simply couldn’t bring the cash in to pay bills while doors were shuttered. While some relief was provided, only one-third of the restaurants that qualified for cash assistance, actually received any. COVID-19 related mandates did a lot of damage to many restaurants.
“Feeling let down is an understatement. Politicians would step in despite never following the science consumers trust,” said Stratis Morfogen, founder and CEO of Brooklyn Dumpling Shop.
“For example, 40 percent of the COVID-19 spread was from home gatherings, with restaurants accounting for only 1.5 percent of the spread. How does it make sense for them to shut us down in the most celebratory time of the year and turn people towards home gatherings? Restaurants carefully followed every guideline and tracking and yet still suffered the most. Mandates have single-handedly killed the economy.”
Digitization plans were sped up during this period, and it helped many restaurants stay in business and connect with their customers, when many others were simply shut with no ability to sell anything.
“COVID-19 basically increased a normal five to seven-year cycle into a year or so, and things will continue to progress as this pace. People use technology even more and in different ways than before, adoption is pervasive across consumer segments and generations,” said Rowe.
“We see concepts like Rise Southern Biscuits and Righteous Chicken and Brooklyn Dumpling Shop eliminating labor from restaurants and increasing profit margins by automating functions like cashiers, expo, food runners, hostesses through kiosks, mobile ordering and smart locker system technology – all while increasing customer satisfaction.”
Supply chain issues won’t cease in 2022, though it shouldn’t get any worse if things continue as they are. Brands need to anticipate supply chain problems, and assume it will break to protect themselves against any problems.
“When it comes to supply chains issues, we all face them and knew it was coming. We acted accordingly, planning and stocking up, so we didn’t have any problems. And we don’t believe we will encounter any issues because we anticipated that the supply chain would break,” said Morfogen.
Digitization is the key to mitigation
F&B by its very nature will always be in demand and see steady growth, as long as there are no external factors limiting it. For the last two years, the restaurant industry has seen a constraint like no other in its history, and is emerging smarter.
Restaurants first faced mandates to close their restaurants, so they could conduct no business. The savviest operators shifted some of their menus online and began growing their delivery model, allowing them to earn some revenue and soften the blow.
Tech has typically been the answer to many problems of labor and supply. Brands like The Brooklyn Dumpling shop haven’t suffered as greatly in the Great Resignation as many others due to the labor-light model that makes strong use of technology to deliver the same services that a crew would.
However there has also been something of a sea-change in terms of the attitude of foodservice workers, who are now demanding higher wages and better working conditions, and the prevailing attitude of the country seems to be one that supports the workers.
In 2022, restaurants will need to strongly focus on digitizing as much of their operation as possible, whilst creating the culture and conditions that reduce staff turnover.
