Consumer Trends

3 anvils hanging over restaurateurs' heads

Crystal balls tend to be hazy. Here are some what-ifs that may be difficult to tune in.
Illustration by Nico Heins

If there’s an overriding lesson from the pandemic, it’s that you never know what surprises could lie ahead. The best any business person can do is consider the possibilities, based on what’s happening right now, and contemplate what changes the unexpected developments might trigger.

Here are a few of the what-ifs that are on our minds.

What if menu prices move beyond consumers’ comfort zones?

Restaurants would not have become America’s kitchens if dining out wasn’t an affordable option. The modern industry really came to be in the 1970s and ‘80s, when the rise of the two-wage-earner household relieved parents of traditional every-night kitchen duties. A family could afford to dine out at the slew of chain restaurants that sprang up to meet the need. Restaurant trips became routine indulgences, eating up more than half of every dollar Americans spent on food.

That positive has eroded significantly in recent years. For a variety of reasons, food and labor costs soared. Landlords, insurers and utility companies upped their charges. Operators felt they had no choice but to raise menu prices by an average of 8%, an unprecedented increase for the modern trade. 

Customers were willing to pay those higher charges, just not as often. Traffic slid as the public cut back.

What happens if prices don’t stabilize, or, worse, rise again because of anything from unforeseen wars to weather catastrophes?  The industry is counting on technology to boost efficiency and thereby offset higher labor expenses, and that will undoubtedly help.

But you have to wonder if we’ll also see the rise of new concepts that have found unique ways to deliver value, be it through the products they offer, the way they operate or some breakthrough that we can’t yet imagine.

If it sounds far-fetched, consider that we’ve seen it before. An entrepreneurs’ dream became an industry giant by selling a familiar sandwich at a fraction of what other places were charging. It’s called McDonald’s.

What if restaurants get run over by changes in transportation norms?

We’ve already seen darkened downtowns take a significant toll on restaurants. How about the revolutionary changes that seem all but certain in the way customers get to a restaurant, wherever it might be located?

New York City is poised to become the first metropolis in the nation to adopt congestion pricing, or charging motorists a stiff fee for the privilege of traversing highly trafficked streets. In the Big Apple’s case, that’s all of Manhattan from 60th Street down, or the busiest section of the city. Officials decided last week that cars would be charged $15 to enter the area. Taxis, Ubers and Lyfts will be required to levy a surcharge on top of whatever municipal expenses they already pay. Trucks hauling supplies to restaurants will be hit each trip with an additional fee of $24 to $36, depending on their size.

In short, the cost of dining out in America’s restaurant mecca is going to rise. See the item above about how customers might react to a continuing climb in restaurant prices.

If congestion pricing seems like a New York-centric oddity, keep in mind that a number of European markets have already employed the tactic as a way of tempering pollution. Other U.S. cities will undoubtedly be closely monitoring how the U.S. pilot goes in New York.

Restaurants in non-urban locations have their own transportation issues to consider. Electric cars have morphed from novelties to mainstream options. Networks of charging stations are arising as you read this. Are eating places squandering an opportunity to be part of them? At the very least, they would offer another guest amenity. At best, they could tap a new revenue stream. Yet alternative sites like c-stores and retail stores appear to be landing the installations far more regularly than restaurants.

What if California’s new wage-setting model proves not to be a fluke?

Union leaders hailed the adoption by California of a new way of setting fast-food wages as the biggest victory organized labor has notched in half a century. As the result of a deal brokered by Gov. Gavin Newsom, representatives of the state’s quick-service workforce will have as much say on what their constituents will be paid as employers do. And that’s after winning a 29% wage hike that takes effect April 1.

It’s called sectoral bargaining, and it’s catching on elsewhere. New York City, for instance, recently set a minimum wage just for third-party delivery service drivers of $17.96 an hour, with a jump of $2 by April 2025. Los Angeles has raised the minimum wage of healthcare workers in the city to $25 an hour. And Europe is no stranger to the concept.

It remains to be seen if the notion will catch on here. If it does, restaurant employers could find themselves with less control over what they pay, which will likely accelerate their labor expenses.

The upshot: Menu prices could rise for yet another reason.

This story is part of Restaurant Business’ look back at 2023. Click here to read our other year-end coverage. 

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