Restaurant recovery is being slowed by labor, supply costs

Rising labor and food costs are chipping away at the restaurant industry’s hard-won gains and delaying recovery, according to the findings of a new report.

As the world enters the third year of the ongoing pandemic, restaurant operators are continuing to adapt to doing business in the face of an onslaught of challenges from labor to inflation and Covid variants. While sales are rebounding, a report from the National Restaurant Association suggests it will be a year or more before conditions return to normal as tens of thousands of restaurants have shuttered — some permanently.

The foodservice industry will reach $898 billion in sales this year, up from $799 billion in 2021 and surpassing pre-pandemic sales levels from 2019 of $864 billion, the group estimates in its “State of the Restaurant Industry Report” on Tuesday. However, when adjusted for inflation, sales in 2022 are projected to remain below pre-pandemic levels, they said. Much of last year’s gains were tied to higher prices as costs soared for operators.

“2022 for the restaurant industry will remain another year of transition, and the year is off to a pretty sober start,” said Hudson Riehle, senior vice president of the association’s research & knowledge group. “When you survey restaurant operators, 76% across the country now say that business currently is worse than it was three months ago. It remains a fairly volatile and uncertain environment.”

While the group’s data show more than half of all operators believe it will be at least a year for business to return to normal, most operators, from fine dining to quick service, said they expect sales will either maintain or grow this year, exhibiting cautious optimism.

The report was compiled from a survey of 3,000 operators taken in November and December 2021.

At Robert Freeman’s restaurant in San Francisco, The Buena Vista Cafe, things are improving but are still a challenge. Sales dropped more than 60% in 2020, and rebounded to down 31% in 2021.

“It’s been a little like Coney Island — up and down on a rollercoaster,” Freeman said of the Covid variants and operational regulations that have shifted over the last two years.

On-premise businesses like Freeman’s are still short-staffed, the data show, with 7 in 10 saying they didn’t have enough employees to adequately staff their restaurants. The shortage was felt the most in family and fine dining categories. In all, the sector added back 1.7 million jobs in 2021, the data show.

The Buena Vista could use about a half dozen more workers at the moment, Freeman said. He is running shorter shifts to make things work.

While labor remains a top challenge, inflation is a close second, Riehle said. Food costs as a percentage of sales are up for 9 in 10 restaurant operators compared with…