New NCRLA survey finds the economy is disrupting service across the industry
FOR IMMEDIATE RELEASE
[RALEIGH, N.C.] (Sep. 2, 2022) – Running a restaurant right now is a daily turn at Jenga®, with operators carefully pulling from the foundation of their operating plans to prop up new supports in a changing economy.
The costs of goods restaurateurs need most have continued to accelerate, and according to a survey released by the North Carolina Restaurant and Lodging Association (NCRLA), 37% of North Carolina operators say business conditions are worse now than they were three months ago.
This finding follows a June National Restaurant Association survey in which 43% of operators said they think conditions will worsen in the next six months, which was the highest level of pessimism since 2008.
“Restaurant operators are masters at balancing adaptation and innovation to provide amazing service for their customers,” said Lynn Minges, NCRLA President and CEO. “While operators are more pessimistic about the economy, they aren’t letting that get in the way of serving great food, providing exceptional service, and creating a memorable experience.”
Findings from the new survey highlight how current economic conditions are disrupting the industry in North Carolina.
Soaring costs are limiting restaurant operations
Approximately 95% of a restaurant’s sales dollars go to food, labor, and operating costs — all of which are increasing each month. According to the U.S. Bureau of Labor Statistics, wholesale food prices have increased 16.3% in the last 12 months and nationally menu prices have only risen 7.6% in the same period. The result: Profits are suffering. 92% of North Carolina operators say their restaurant is less profitable than it was in 2019.
- In the new survey, 82% of operators said their total food and beverage costs are higher than 2019 and across the board, many other costs are up.
- 71% of operators say their total occupancy costs are higher than 2019
- 73% of operators say their total utility costs are higher than 2019
- 96% of operators say their other operating costs (supplies, G&A, etc.) are higher than 2019
“Consumers are watching prices rise faster in grocery stores than they are in restaurants and see an increased value in spending their food dollars in restaurants. However, the moderate menu price increases aren’t balancing the surging input costs and this is forcing operators to cut hours, change their menus, postpone expansions, and reduce third-party delivery,” said Minges.
Pandemic debt has come due, and operators can’t pay
During the first two years of the pandemic, 65% of restaurants took on new loan debt to adjust business models and continue operating. According to new national data from the National Restaurant Association, the loans were a mix of forgivable government loans, government disaster loans, and private-sector loans.
- Paycheck Protection Program (PPP) loans were the most common — taken on by 59% of operators.
- 48% of operators took on an Economic Injury Disaster Loan (EIDL) issued by the U.S. Small Business Administration or lending partner.
- 31% took on a private-sector loan from a bank, credit card or other entity.
“For many operators who received EIDL loans, the deferment period for payment will soon end and it will be an overwhelming challenge for a majority of them to begin repayment right now,” said Minges. “The National Restaurant Association data shows that, of the operators who have not begun loan repayment, only 23% say they will be able to make principal and interest payments. Another 46% expect to be able to pay the principal, but not 30 months of accrued interest.”
Restaurants are slowly adding jobs to get back to pre-pandemic employment levels
A strong majority of restaurants are still actively seeking to fill positions — even as they face building headwinds of a slowing economy. Despite the overall industry adding 74,000 jobs in July, in the new survey, 80% of North Carolina operators report not having enough employees to support customer demandand 90% of operators say they will likely hire additional employees during the next six months.
- 66% of operators say their restaurant is currently more than 10% below necessary staffing levels.
- 15% of operators say their restaurant is more than 20% below required staffing levels.
- 94% of operators say their restaurant currently has job openings that are difficult to fill.
“The restaurant industry is built on hospitality, and to ensure we can provide the highest levels of service, we hire talented people. We know that many people have been reconsidering their careers recently, and we hope that they will look seriously at the industry. Restaurants have good-paying jobs available at every experience level for people from every background. And these jobs provide the skills necessary to be successful in any career, and in life,” said Minges.
The National Restaurant Association Research Group conducted a survey of 4,200 restaurant operators July 14- Aug. 5, 2022. North Carolina responses were compiled to produce the state findings. Find a report of key North Carolina findings here and national findings here.
About the North Carolina Restaurant and Lodging Association
The North Carolina Restaurant & Lodging Association (NCRLA) serves to advance and protect the interests of more than 20,000 businesses that employ 11% of the state’s workforce and generate more than $27.3 billion in sales annually.
About the National Restaurant Association
Founded in 1919, the National Restaurant Association is the leading business association for the restaurant industry, which comprises nearly 1 million restaurant and foodservice outlets and a workforce of 14.5 million employees. Together with 52 State Associations, we are a network of professional organizations dedicated to serving every restaurant through advocacy, education, and food safety. We sponsor the industry’s largest trade show (National Restaurant Association Show); leading food safety training and certification program (ServSafe); unique career-building high school program (the NRAEF’s ProStart). For more information, visit Restaurant.org and find @WeRRestaurants on Twitter, Facebook and YouTube.