The National Restaurant Association is projecting industry sales to rise 12.4% this year to $898 billion, a nominal record that would be 3.9% above sales levels from 2019, according to its annual State of the Restaurant Industry report released Tuesday.
But other data suggest a more challenging year than it appears and even the top-line number isn’t as great when you factor in higher menu prices. According to the association’s mix of data and surveys of operators, restaurants expect lower profits and sales that didn’t keep pace with inflation.
According to the association—the majority owner of Restaurant Business parent company Winsight—projected sales would be 11.5% below 2019 when adjusted for inflation. Menu price inflation soared last year as operators tried keeping pace with the rising cost of labor and food.
Profitability has already taken a hit and operators don’t appear that optimistic about improvements. Nine in 10 operators said their costs are up and eight in 10 said their profits were lower. Only about 25% of operators expect that to improve this year and a third expect it to get worse.
The results suggest operators are bracing for continued volatility and relatively little relief from the operating challenges they’ve been dealing with.
“Menu price inflation has really taken off,” Hudson Riehle, SVP of the research and knowledge group with the association, said in an upcoming episode of the Restaurant Business podcast “A Deeper Dive.” He noted that menu price inflation, averaged out for the full year, was at its highest rate since 2008.
“It’s a challenge. It’s going to be ongoing, the remainder of the year. We don’t see any immediate relief in food costs, as well as labor cost inflation.”
Restaurant sales are expected to increase this year
Source: National Restaurant Association.
At the same time, however, the results do show improvement in the sales environment. Total sales were $799 billion in 2021—up 18% from 2020. And the $898 billion the association expects this year is a further improvement, even if it isn’t quite to the $918 billion the association expected in 2020 before the pandemic.
“2022 will be better than 2021,” Riehle said. “2021 was better than 2020. But it is still a year of volatility, and one in which the operator will continue to deal with unexpected events in a rapidly changing environment.”
Sales by industry sector
Limited-service restaurants are taking up a greater proportion of industry sales than they did before the pandemic.
Source: National Restaurant Association.
One of those events is labor. Despite that lack of profitability, operators’ biggest concern—by a long shot—remains the simple availability of workers. More than half of operators told the association that “recruiting and retaining employees” was their top concern. Among casual dining operators, for instance, recruitment was the top concern of 51% of operators while “labor costs” were a concern of just 2%.
Food costs, by comparison, were a concern of 17% of operators. But that, Riehle said, has increased in importance—while the labor availability concern has improved over that same period. “Labor recruitment is the top challenge, but it is better,” Riehle said, noting that during the depths of the pandemic some 80% to 90% of operators listed labor availability as their top concern.
Still, the vast majority of operators say they don’t have enough employees to meet demand.
Operators still can’t find workers
Percent of operators who say they don’t have enough workers.
Source: National Restaurant Association.
Supply chain concerns were massive in 2021. The association said that 96% of operators experienced supply delays or shortages of food or beverage items in recent months, and some 80% of operators experienced delays in equipment or service items.
Still, consumers want to dine out more—though they want to dine at restaurants. More than half of consumers, 51%, said they were not eating out at restaurants as much as they wanted. By comparison, 37% said they were not getting enough takeout or delivery.
That “pent-up demand” is most pronounced in lower-income households. Sixty percent of consumers in households making less than $50,000 a year don’t eat at restaurants as much. By comparison, only 32% of those in households making more than $100,000 don’t eat out as much as they’d like.
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