New snapshot shows a backslide in restaurants' recovery

Labor problems and the delta variant are undercutting sales, while costs soar, the National Restaurant Association found in a survey.
Photograph: Shutterstock

Restaurants’ inability to hire enough workers is hobbling the industry’s recovery from the pandemic, with inadequate staffing cited as the Number One reason by far for taking guest seats out of use, according to a new business snapshot from the National Restaurant Association.

A survey of operators by the association found that 44% have voluntarily reduced their dine-in capacities. About 4 in 5 full-service establishments (81%) and 3 of 5 fast-food places (61%) said they voluntarily shut portions of their dining rooms in August because they lack the staff to serve those areas.

In contrast, only 21% of respondents across both segments said the idled seats were not needed because traffic had tapered off.

Industrywide, 78% of operators said they do not have enough employees to handle all the business available to them. Nearly 40% reported that they were at least 20% below their staffing targets.

The survey confirmed what many operators have noted anecdotally: Dine-in guest traffic has been eroded by fears of the delta variant, a more contagious form of coronavirus. About 78% of the participating restaurateurs said they’d seen less demand for onsite dining in recent weeks.

A majority of the respondents (55%) expect sales to erode through November.

The association noted that the worsening conditions have left operators more pessimistic about the industry’s rebound. About 44% now expect the business’ recovery to take more than another year. Nineteen percent voiced a belief that their establishments will never get back to where they were in 2019.

The negative factors extend beyond the labor situation, the association found.  Almost every operator (95%) participating in its survey said they’d suffered through disruptions in the re-up of their supplies, prompting 75% to revamp their menus to use what was available.

Profits, meanwhile, are being eroded by soaring labor and food costs, according to the findings. Sixty-five percent of respondents said their margins had contracted during the last three months, and 85% said their still not seeing profits comparable to what they generated in 2019.

"Our nation's restaurant recovery is officially moving in reverse," Sean Kennedy, the association’s EVP of public affairs, said in a statement.

Key findings of the spot check were cited in a letter sent by Kennedy to Congressional leaders as the lawmakers harden into their parties’ positions on the Build Back Better Act, the $3.5 billion bill that encompasses much of President Biden’s legislative agenda. The restaurant group argues in the communication that the restaurant industry has been too injured by industry conditions to absorb certain components of the Act.

“We support many of the goals of the Build Back Better Act, but the legislation is too large and too expensive a check for small businesses to take on,” Kennedy wrote.

Among the specific components opposed by the association is an increase in corporate tax rates, the disallowance of certain tax deductions for small businesses, more aggressive taxation of family businesses passed down from one generation to the next, and penalties on operators who inadvertently divert a portion of tips from servers and bartenders.

“Restaurants still need help today and overwhelming them with costly new obligations will only prevent progress in turning the tide of recovery,” Kennedy argued.

The National Restaurant Association is the majority owner of Restaurant Business but does not influence its content. 

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