Survey Finds that 46 Percent of Operators Believe Business Conditions are Worsening

A new survey from the National Restaurant Association found that 46 percent of operators said business conditions are worse than three months ago, while only 16 percent reported an improvement.

Profitability is another major area of concern. Eighty-five percent of the 4,200 operators surveyed said their restaurant is less profitable now than it was in 2019 before the pandemic, while only 6 percent said their restaurant was more profitable and 9 percent said it was about the same. Those figures are likely contributing to operators’ overall outlook for the economy. Most operators said they did not expect a return to normal business conditions in the near future, with 12 percent predicting it would be seven to 12 months before business conditions normalize, 41 percent estimating it would take more than a year and 29 percent believing conditions will never return to normal.

“Running a restaurant is a balancing act requiring adaptation and innovation, two areas where restaurateurs excel,” said Michelle Korsmo, president and CEO of the National Restaurant Association and a panelist at the 2022 FEDA Annual Conference. “And while operators are more pessimistic about the economy, they are working hard to continue to provide quality and value for customers. Serving great food, providing exceptional service, and creating a memorable experience remains the foundation of every restaurant.”

Two factors seem to be driving operators’ negative outlook: soaring costs and pandemic debt. Wholesale food prices have increased 16.3 percent in the past year, even though menu prices are up only 7.6 percent. In all, 88 percent of operators said their total food and beverage costs are higher than in 2019 and 65 percent said their total occupancy costs were up.

Finally, restaurants that took out loans to get by during the worst stretches of the pandemic are now struggling as that debt comes due. According to the National Restaurant Association, 65 percent of restaurants took on new loan debt to adjust business models and continue operating in 2020 and 2021. The bulk of those loans (59 percent) were through the Paycheck Protection Program while another 48 percent were Economic Injury Disaster Loans (EIDL) issued by the U.S. Small Business Administration or a lending partner. However, 31 percent of loans were taken through a bank, credit card or other private-sector lender.

For those restaurants that took out an EIDL loan, only 23 percent said they would be able to make scheduled principal and interest payments once the payback deferment period is over. Another 46 percent said they would be able to make principal payments, but not the payments on the 30 months of accrued interest. This presents another hardship for operators, that are already dealing with a labor shortage and rising costs. “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,” Korsmo said.