New Jersey restaurateurs face weaker business conditions as economic pessimism grows

New Jersey restaurateurs face weaker business conditions as economic pessimism grows

NJRHA Survey Finds Economy Disrupting Services Across Industry

FOR IMMEDIATE RELEASE
August 29, 2022

TRENTON – Soaring food and utility costs coupled with an ongoing hiring crisis are among the top issues affecting the industry which is still recovering from shutdowns and customer capacity limitations during the Covid-pandemic. 19, according to a new survey released today by the New Jersey Restaurant and Hotel Association (NJRHA).

These and other challenges explain why 54% of New Jersey restaurant owners say business conditions are worse now than they were three months ago. The finding follows a June survey by the National Restaurant Association in which 43% of operators across the country said they thought conditions would get worse over the next six months, which was the highest level of pessimism. since 2008.

NJRHA President Dana Lancellotti said that despite the impact of the economy on the industry as a whole, operators are still providing the best possible service to their customers.

“Restaurant owners are masters at balancing adaptation and innovation to deliver exceptional service to their customers,” Lancellotti said. “While operators are more pessimistic about the economy, they aren’t letting that stop them from serving great food, providing exceptional service and creating a memorable experience.”

About 95% of a restaurant’s sales dollars are spent on food, labor and operating costs. While wholesale food prices have risen 16.3% over the past 12 months, menu prices have risen only 7.6%, according to the US Bureau of Labor Statistics. As a result, profits suffer.

According to the NRJHA survey, 83% of New Jersey restaurant owners say their restaurant is less profitable than it was in 2019.

  • In the new survey, 84% of operators said their total food and beverage costs were higher than they were in 2019 and many other expenses were up.
    • 59% of operators say their total occupancy costs are higher than in 2019
    • 74% of operators say their total utility costs are higher than in 2019
    • 93% of operators declare that their other operating expenses (supplies, G&A, etc.) are higher than in 2019

“Consumers are seeing prices rise faster in grocery stores than in restaurants, so they see increased value in spending their food budget in restaurants. However, inflation is still impacting the industry and forcing operators to reduce hours, change their menus, postpone extensions and reduce third-party delivery,” Lancellotti said.

Pandemic debt has come due and operators cannot pay

In the first two years of the pandemic, 65% of restaurants took out new loans to adjust their business models and keep operating. According to new national data from the National Restaurant Association, the loans were a mix of repayable government loans, government disaster loans and private sector loans.

  • Paycheck Protection Program (PPP) loans were the most common – taken out by 59% of operators.
  • 48% of operators have an Economic Disaster Disaster Loan (EIDL) issued by the US Small Business Administration or a lending partner.
  • 31% took out a private sector loan from a bank, credit card or other entity.

“For many operators who have received EIDL loans, the payment deferral period will end soon and it will be an overwhelming challenge for the majority of them to start repayment now,” Lancellotti said. “Data from the National Restaurant Association shows that among operators who have not started repaying their loan, only 23% say they will be able to repay principal and interest. 46% expect to be able to pay the principal, but not 30 months of accrued interest.

Restaurants are slowly adding jobs to return to pre-pandemic employment levels

A large majority of restaurants are still actively looking for staff, even as they face the challenges of a slowing economy. Despite July’s industrywide job increase of 74,000, 66% of New Jersey operators say they don’t have enough employees to meet customer demand, and 79% of operators say they will likely hire additional employees over the next six months, according to the survey.

  • 63% of operators say their restaurant is currently more than 10% understaffed.
  • 86% of operators say their restaurant currently has hard-to-fill vacancies.

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

However, Lancellotti remains optimistic that the industry will recover its workforce.

“The restaurant industry is built on hospitality, and to ensure we can provide the highest levels of service, we hire talented people,” Lancellotti said. “We know that many people have recently reconsidered their careers and we hope they will take a serious look at this industry. Restaurants offer well-paying jobs at all experience levels for people from all walks of life. And these jobs provide the skills needed to succeed in any career and in life.

The National Restaurant Association research group conducted a survey of 4,200 restaurant owners from July 14 through August 5, 2022. Responses from New Jersey were compiled to produce the state’s findings. Find a report of New Jersey’s key findings here and national findings here.

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New Jersey

Restaurant owners expect business conditions to remain difficult

  • Business conditions have deteriorated in recent months, according to many restaurateurs. 54% of New Jersey operators say their restaurant’s business conditions are worse now than they were 3 months ago. Only 14% say business conditions have improved over the past 3 months.
  • Looking ahead, most New Jersey restaurateurs do not expect a return to normal business conditions anytime soon. 10% of operators believe it will take 7-12 months before business conditions return to normal for their restaurant, while 47% believe it will take more than a year. An additional 20% of operators say that commercial terms never back to normal for their restaurant.

Soaring costs across all areas of the business create challenges for restaurateurs

  • A majority of New Jersey operators say their costs are higher now than they were before the pandemic:
  • 84% of operators say their total food and beverage costs are higher than in 2019
  • 86% of operators say their total labor costs are higher than in 2019
  • 59% of operators say their total occupancy costs are higher than in 2019
  • 74% of operators say their total utility costs are higher than in 2019
  • 93% of operators declare that their other operating expenses (supplies, G&A, etc.) are higher than in 2019
  • New Jersey restaurants have taken a number of actions in recent months due to rising costs:
  • 87% of restaurants increased menu prices, while 65% changed the food and drinks they offered on the menu
  • 70% of restaurants reduced their opening hours on open days, while 37% closed on days they would normally be open
  • 39% of operators say they have postponed their expansion plans
  • 48% of operators say they have stopped operating at full capacity
  • 36% of restaurants cut staff, while 27% postponed hiring plans
  • 25% of operators say they have integrated more technology into their restaurant
  • 12% of operators say they have eliminated third-party delivery

Profitability is down from pre-pandemic levels

  • Despite the wide variety of mitigating measures taken to deal with higher costs, the vast majority of restaurants in New Jersey are less profitable now than they were before the pandemic.
  • 83% of New Jersey operators say their restaurant is less profitable now than it was in 2019 before the pandemic. Only 4% of operators say their restaurant is more profitable, while 13% say their profitability has stayed about the same.

Majority of New Jersey restaurants are understaffed and actively seeking to fill positions

  • Although the industry has recovered many jobs lost during the pandemic, the majority of restaurants in New Jersey remain understaffed. 66% of operators say their restaurant currently does this not have enough employees to meet the demand of its existing customers.
  • For most restaurants in New Jersey, staffing is well below necessary levels. Among restaurants that are currently understaffed, 63% of operators say their restaurant is more than 10% below required staffing levels. 11% of operators are currently more than 20% below the necessary staffing levels.
  • 86% of New Jersey operators say their restaurant currently has hard-to-fill vacancies.
  • 79% of New Jersey restaurant owners say they are likely to hire additional employees in the next 6 months if there are qualified candidates available.

Source: National Restaurant Association, national survey of 4,200 restaurateurs conducted between July 14 and August 5, 2022

About the National Restaurant Association

Founded in 1919, the National Restaurant Association is the premier trade association for the restaurant industry, comprising nearly one million restaurant and foodservice outlets and a workforce of 14.5 million employees. Along with 52 state associations, we form a network of professional organizations dedicated to serving every restaurant through outreach, education and food safety. We sponsor the largest trade show in the industry (National Restaurant Association Show); food safety training and certification program (ServSafe); unique high school career development program (NRAEF’s ProStart). For more information, visit Restaurant.org and find @WeRRestaurants on Twitter, Facebook and Youtube.

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