Survey finds business is up at restaurants — but profits are down

Restaurants across New Jersey got an increase in business this summer, thanks to an unusual source: inflation.

Since prices at restaurants did not jump as quickly as prices in grocery stores, an increased number of people turned to restaurants for meals.

Unfortunately for the industry, this is a good-news/bad-news scenario. Because restaurants were slower to raise their prices — despite facing increasing food costs themselves — the industry did not benefit from the surge in business.

In fact, a survey released Monday by the New Jersey Restaurant & Hospitality Association of its members in August, found that 54% of New Jersey restaurant operators said business conditions are worse now than they were three months ago. Only 14% said business conditions improved during the last three months.

In addition, 83% of New Jersey restaurant operators said their restaurant is less profitable than it was in 2019, according to the NRJHA survey. Only 4% said it is more profitable.

The survey found that 84% of operators said their total food and beverage costs are higher than they were 2019 and many other expenses are up. Other increases include:

  • 86% of operators said their total labor costs are higher than 2019;
  • 74% of operators said their total utility costs are higher than 2019;
  • 93% of operators said their other operating costs (supplies, etc.) are higher than 2019.

NJRHA President Dana Lancellotti said the industry still is in a tough spot.

Post-pandemic look at restaurants in N.J.

According to a survey by the New Jersey Restaurant & Hospitality Association of its members:

  • 87% increased menu prices;
  • 70% reduced hours of operation;
  • 65% changed the food and beverage items;
  • 48% stopped operating at full capacity;
  • 39% postponed plans for expansion;
  • 37% closed on days they used to be open;
  • 36% cut staffing levels;
  • 12% eliminated third-party delivery.

“Inflation is still impacting the industry and is forcing operators to cut hours, change their menus, postpone expansions and reduce third-party delivery,” she said.

Simply put, it’s a numbers game.

Approximately 95% of a restaurant’s sales dollars go to food, labor and operating costs. And, while wholesale food prices have increased 16.3% in the last 12 months, menu prices have only risen 7.6%, according to the U.S. Bureau of Labor Statistics.

And, of course, there is this: Two of three (66%) said they are understaffed — and struggling to find help.

Unfortunately for the industry, the outlook is weak.

Most New Jersey restaurant operators do not expect a return to normal business conditions anytime soon. Only 10% of operators think it will be 7-12 months before business conditions return to normal for their restaurant, while 47% think it will be more than a year. An additional 20% of operators say business conditions will never return.

“We face the unique issue that hospitality is an in-person job,” Lancellotti said. “Unfortunately, our industry cannot take advantage of the growing work-from-home trend that other industries offer. Hospitality is a face-to-face business.”