Restaurant owners and operators ended 2022 with mixed results and outlooks.
ST LOUIS, MO (StLouisRestaurantReview) 2022 will go down in restaurant history as one of the most challenging times, if not the most difficult time, for the industry.
The National Restaurant Association released an article on January 5, 2023 that provides some interesting insights.
The industry was faced with a multitude of challenges, including:
- Inflation
- Lack of capital
- Supply chain
- Challenging employment market
- Higher menu prices affecting sales
- A natural increase in sales tax, property tax, insurance, etc.
Inflation was one of the most unpredictable challenges as prices were changing daily, making it difficult for restaurant owners to know how to price, limited by the ability to change prices as fast as they needed.
Lack of capital was created by an increase in interest rates, making it unaffordable for small restaurants, not to mention lenders have pulled back on loaning money, which is the purpose of increasing interest rates.
Supply chain issues, which closed some niche restaurants because they could not get the products they need, which are what their customers wanted and expected.
The challenge in the employment market was created by the pandemic lockdown, changing the way people lived and wanted to work. This challenge will continue, and restaurant owners will need to turn these jobs into careers with benefits and guaranteed incomes.
The increase in food costs has forced many restaurant operators to increase prices, which in many cases slowed sales.
On top of all of these challenges, they still had the normal increase in sales tax, insurance, property taxes, etc. The sad part of this expense is that it is to fund the organizations that created all of these issues for the operators.
Recommendations to ensure survival for restaurants are:
- Know your numbers: Get involved if you are not actively involved in your accounting. There is no way to control your menu prices without knowing your costs. Financial responsibility will be the assurance of survival.
- Remain legal: we have witnessed an increase in operators taking more risks thinking it is necessary for survival. Many are delaying making sales tax payments, withholding tax payments, delaying payments to food vendors, and hiring illegal immigrants due to the lack of proper staffing. All can and typically result in fatal risks to the business, which goes back to you knowing your numbers. Knowing your numbers will fix most of these issues.
- Great marketing: this is commonly overlooked by operators, especially in good times, but it is necessary for all business cycles.
All three recommendations should always be a priority. Still, it is common during good economic times that operators focus on customer and food quality rather than the critical factors that ensure success.
We strongly encourage you to click and read the article released by the National Restaurant Association.
