It has been no surprise that the foodservice industry suffered during the pandemic. From the lockdowns to patron fear of catching COVID, we witnessed some of our favorite restaurants disappear. Still, the industry continues to fight battles along all fronts—inflationary pressures, rising employment costs, and supply chain disruptions, to name a few. It has been over two years since the emergence of the pandemic, which offers us the opportunity to dissect how the foodservice sector has coped up until now.

For restaurant owners and other industry stakeholders, labor has been a main topic of discussion. Within the early part of 2022, job reports have been relatively strong. Unemployment decreased from 4 percent in January to 3.6 percent in May. Albeit, job openings data indicate shortages on the labor front. From January 2022 to April 2022, total nonfarm job openings hovered around record highs, averaging approximately 11.5 million jobs. Foodservice and drinking places’ year-to-date employment has averaged 11.5 million employees. Prior to the pandemic, employment in the sector averaged 12 million employees in 2019 —indicating employment has not recovered to pre-pandemic norms. With demand and supply for labor off-balance, business owners will be forced to make difficult decisions on how to handle their labor issues—especially given increased employment costs which hit a year-over-year record in Q1 2022.  Potential employees may have the upper hand in negotiations requiring larger incomes and increased benefits.

In terms of performance, food service and drinking places’ sales totaled $407.9 billion from January 2022 to May 2022, approximately 24.3 percent more when compared to the same time last year.  Prior to the pandemic,  food service and drinking place sales totaled nearly $773 billion in 2019. In 2020 sales decreased 16 percent as a result of COVID complications. Previous Urner Barry Consulting forecasts suggested sales would decrease anywhere between 11 percent and 20 percent during this timeframe. Sales rebounded in 2021 to $873 billion, an increase of approximately 34 percent from 2020 and 13 percent from 2019 levels.

During the early part of the pandemic, consumer expenditures shifted away from foodservice to cooking at home. As a result, consumer expenditures at full-service restaurants decreased 25 percent in 2020 from 2019. Limited-service restaurants decreased only 3 percent during the same time. For reference, a key distinguishment between full-service and limited-service restaurants is staff interaction. Typically, interactions end when food is served at limited-service establishments, unlike when dining at full-service establishments. Examples of full-time establishments include Chilis and Applebee’s. Limited-service establishments include establishments like McDonald’s and Starbucks.

As COVID restrictions loosened, full-service and limited-service restaurant expenditures increased 51 percent and 19 percent in 2021 from 2020. When compared to 2019, 2021 full-service and limited-service expenditures increased 14 percent and 15 percent.

According to Open Table, weekly year-over-year seated diners have trended positively since the shutdowns in the spring of 2020. However, data suggests that not every city has recovered in the same way. New York City, Chicago, and Los Angeles have yet to reach levels with increased diners from year-ago levels. Conversely, Houston and Phoneix have experienced positive rates of weekly seated diners consistently from early February through May 2022. Of course, patrons have several ways of reserving tables at their favorite restaurants—so the numbers suggested here cannot fully illustrate the entire foodservice picture. Still, the data can be used as a barometer of how the industry is stacking up compared to times. And the data presented here suggest the industry hasn’t recovered in its entirety—especially in our largest cities.

With respect to protein costs, the industry has not been immune to additional increased costs. Many prices continue to hover at or around all-time seasonal highs—despite some downward corrections.  Elevated prices for foodservice establishments in many cases are resulting in higher menu prices for consumers. For instance, the consumer price index for food away from home, a measurement used to measure price increases for consumers, increased 7.4 percent in May 2022 from May 2021—the largest year-over-year increase since November 1981. As of now, data doesn’t necessarily suggest consumer push back on these increased prices — food service and drinking places’ sales, as mentioned previously, have been relatively strong. But how long can consumers hold out on these prices? And how will the industry react to the potential pushback?

While the foodservice industry has some promising statistics that back a supportive claim of rebounding, the industry still has much to overcome before we can consider a full recovery. In a period with historic rates of inflation, business owners will have to make difficult decisions on employment and menu items. Increased prices are likely to continue to be passed on to the consumer. Data already suggests that consumers are rethinking the number of times they dine out. With food prices at multi-decade highs, establishments must continue to innovate to keep patrons happy.

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Andrei Rjedkin
Urner Barry
1-732-240-5330 ext 293
arjedkin@urnerbarry.com 

Angel Rubio
Urner Barry
1-732-240-5330
arubio@urnerbarry.com

Akash Pandey
Urner Barry
1-732-240-5330
apandey@urnerbarry.com