When will the industry recover its lost sales? That depends

At Restaurant Leadership Conference, Technomic notes some sectors are fully recovered. Others could take some time.
Restaurant Leadership Conference
Technomic Managing Principal Joe Pawlak./Photo by Scott Mitchell.

The restaurant industry is seeing strong sales this year, but much of the industry is still years away from recovery.

That, at least, is according to Technomic. Presenting at the Restaurant Leadership Conference in Phoenix on Wednesday, Managing Principal Joe Pawlak said that fine dining in particular is at least three years away from a full recovery.

On the other hand, limited-service restaurants—quick service and fast casual—have recovered this year. “QSR will be fully recovered by the end of this year,” Pawlak said. “They’re going to start getting back on a normal growth trajectory going forward.” Both Technomic and Restaurant Business are owned by Winsight, which operates the conference.

Casual dining restaurants are expected to recover by 2023. Midscale, or family dining restaurants, are expected to come back by 2024. Fine dining, hit hardest by the pandemic, may not come back until 2025.

Yet on balance Technomic presented an optimistic look at the state of the industry. Restaurants lost about half their sales at the outset of the pandemic and then came back gradually in the months afterward, getting to recovery level by this summer.

Consumers, armed with cash from stimulus payments and higher wages and having not spent as much because they’d been cutting back, started going to restaurants again as they sought to release “pent-up demand.”

“Last year consumers sat at home,” Pawlak said. “They saved a lot of money. Then they started ordering delivery. But they missed the restaurant experience. A lot of things have conspired to be very positive on this industry.”

Much of the business nevertheless shifted toward pre-ordering and drive-thru. Before the pandemic, customers pre-ordered 9% of restaurant orders. Last year, that spiked to 25%. Even now, it remains more than twice of what it was at 20%.

Drive-thru, meanwhile, also took off, rising from 30% of orders to 45%. It’s back down to 40% so far, according to Technomic.

That said, as most operators will attest, there are big challenges. The biggest one by a long shot is labor, which has cost sales for chains such as Jack in the Box and Domino’s.

Wages have taken off. Wages in the restaurant industry are up 14.1% this year, according to Technomic. Wages for all industries are up 5.5%.

Supply chain is also a concern. Labor problems affecting distributors and suppliers are driving up costs. Wholesale food prices are up 10.5%. Chicken prices year-over-year, however, were up 36% in October. Beef was up 41%. Cooking oils up 39%.

That’s leading to higher prices. Menu prices rose 5.3% year-over-year in October, twice the 25-year average. Factor out school lunch programs and break it down by sector and those prices are even higher, up 7.1% for limited service and 5.9% for full service.

That could be a problem after a while. For now, consumers are buying, Pawlak said, because of pent-up demand, an expressed concern for the industry and the fact that grocery prices are up, too.

At some point, however, that could change, which could lead to a push for more value.

For now, however, consumers clearly like the restaurant industry. “The restaurant experience is proving to be ingrained,” Pawlak said. “Rumors of our death have been greatly exaggerated.”

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