The restaurant industry is on its way to nearly $1 trillion in sales this year, according to a new report from the National Restaurant Association. But restaurateurs are still adjusting to what the report calls “the new normal” brought on by the pandemic.
The association’s State of the Restaurant Industry report forecasts sales of $997 billion in 2023, driven in part by higher menu prices. The foodservice industry workforce is also projected to grow by 500,000 jobs to a total employment of 15.5 million by the end of the year.
The report examines key factors impacting the industry—including the current state of the economy, operations, workforce, and food and menu trends—to forecast sales and market trends for the year ahead. It’s based on a range of national surveys of restaurant owners, operators, chefs, and consumers.
The report notes that business conditions “have settled into or are on the path to their new version of normal” for 70% of restaurant operators. But what does the “new normal” mean for restaurants?
During the pandemic, the industry made essential “pivots”—expanding delivery, offering outdoor dining and alcohol-to-go, and making investments in technology—that now appear to be permanent. At least 4 in 10 operators in each of the three limited-service segments— quick-service, fast casual, and coffee and snacks—believe drive-thru lanes will become more common in 2023. “For others,” the report states, “outdoor dining and alcohol-to-go are becoming table stakes. Across all six major segments, more than 9 in 10 operators plan to continue offering outdoor seating, and the same number of operators are also likely to continue offering alcohol-to-go, if their jurisdiction allows it.”
On the technology front, more than 4 in 10 operators are planning investments in equipment or technology to increase front- and back-of-the-house productivity, largely in the order and payment space. Fifty-eight percent of operators say technology and automation will become more commonly used to deal with the labor shortage in their segment of the industry. But they view technology as “generally complementary to human labor and primarily intended to enhance rather than replace workers in the restaurant industry,” the report says.
The “new normal” also means an ongoing struggle to fill vacant positions. Although the restaurant and foodservice industry has added 2.8 million jobs over the past 24 months, most restaurant operators are still actively looking to hire more people while carefully balancing staffing needs with business conditions, the report found. Eighty-seven percent of operators say they’ll likely hire additional employees during the next six to 12 months if they can find qualified applicants. But only 1 in 10 operators think recruiting and retaining employees will be easier in 2023 than it was in 2022.
The report also addresses the now-perennial problem of inflation. Ninety-three percent of operators say their total food costs are higher than they were in 2019. But consumers still want to eat out, even when faced with higher menu prices. Eighty-four percent of consumers say going out to a restaurant with family and friends is a better use of their leisure time than cooking and cleaning up.
To control food, labor, occupancy and utilities expenses, some restaurateurs are streamlining their menus, cutting out less profitable items, although a majority say they’re keeping their menus similar in size to last year. And as more Americans work remotely, blurring traditional mealtimes, operators are trying to lure them in with off-hours or slow-day value deals, flexible pricing, multi-course meal bundles, meal kits and subscriptions. Many also plan to add healthier and nutritious meal options, eco-friendly items, and dishes tailored to takeout in 2023.
“As the restaurant industry adapts to a new normal, operators’ ability to be flexible and diversify their operations is essential to thriving,” said Hudson Riehle, senior vice president of research for the National Restaurant Association. “With profitability under pressure, operators are launching new business models within the industry, re-engineering current concepts, and allocating more space to off-premises business in order to satisfy customers in 2023.”
Other takeaways from the report include:
- Among fine-dining restaurants that offered delivery during the pandemic, 79% added it for the first time; 8 in 10 of those plan to continue.
- Two-thirds of adults say they’re more likely to order takeout food from a restaurant than they were before the pandemic.
- Off-premises-only locations—sometimes referred to as ghost kitchens or virtual kitchens—are expected to grow in popularity; more than 4 in 10 limited-service operators think they will be more common this year.
- 92% of operators say the cost of food is a significant issue for their restaurant.
- In 2023, 47% of operators expect competition to be more intense than last year.