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.”