Experts worry summer’s robust restaurant industry rebound was ‘an artificial sugar rush’

With labor and supply chain woes, and no more government assistance on the horizon, many restaurateurs fear the winter that is coming

Over the summer it looked like the worst was over for restaurants, as diners flooded back, with reservations and sales hitting new highs. Then covid surged, again, and the rebound slowed down.

New jobs numbers out Friday reinforce that idea. In September, food services and drinking establishments added just 29,000 jobs, after shedding 24,700 jobs in August, according to data from the Bureau of Labor Statistics. That’s far lower compared with the average monthly gain of 197,000 jobs from January through July.

Employment overall in the food service sector is down nearly a million jobs from pre-pandemic levels, and restaurants continue to close.

Restaurant sales were flat in August compared with July, but they were still a lot higher than the same period in 2020, according to Census Bureau data. Meanwhile, overall numbers of restaurants are down by 13 percent in September, compared with the spring of 2020, according to market research firm NPD Group’s restaurant census.

And the recent surge in covid cases, which is slowly abating, spooked many diners who earlier this summer had embraced going to restaurants in record levels. Restaurant attendance has been inching down in August and September, according to the reservation app Open Table.

Even with this summer’s surge in restaurant patronage, more than half of 4,000 restaurant operators surveyed in September by the National Restaurant Association say that business conditions are worse now than three months ago. They cite higher food and utility costs and supply-chain problems, but the biggest issue, restaurateurs say, is lack of staff.

The worker shortage has hit the restaurant industry particularly hard, with fast-food restaurants from McDonald’s to Taco Bell limiting service to drive-through and reducing hours because there are fewer restaurant workers.

Fast-food customers are back, but workers are not. It’s triggering major change.

Nearly half of the restaurateurs in the NRA survey said they were not yet operating at full capacity, because they aren’t adequately staffed. Owners have to abbreviate menus to accommodate fewer cooks, and they have to limit dining room capacity because of fewer servers, according to David Portalatin, food industry adviser at the NPD Group. Owners have to shuffle workers around like chess pieces between curbside service, outdoor dining, the bar and the dining room, sometimes going without hosts, bussers or bartenders.

“Everyone assumes business is good, but we’re not there yet,” said restaurateur Sava Lelcaj. She owns three popular upscale restaurants in Ann Arbor, Mich. “We’re really struggling.”

She had to reduce the number of days she’s open because of staffing shortages. And while outdoor spaces have been a godsend to restaurants since the beginning of the pandemic, owners incur additional expenses to build and then set up and break down outdoor dining. Being severely short-staffed already, Lelcaj says, patios far from the kitchen mean “adding 20 more steps for the server to go there and back for extra ketchup.”

And with colder weather around the corner, restaurants nationally are looking at reductions in outdoor dining. Proof of vaccination and flattening covid infection rates may make diners feel more comfortable dining indoors this winter, but labor challenges could continue.

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Where have restaurant workers gone and why don’t they want to come back? For Danielle Walker, 32, in St. Petersburg, Fla., it’s not about the pay, it’s not about the boss, it’s about “how people treat each other. It’s about a lack of civility, compassion and patience.”

She started working as a server in restaurants in Upstate New York when she was 16, moving to Florida in 2012 to work in familiar chains like TGI Friday’s and BJ’s Restaurant and Brewhouse before landing a job in fine dining where she made between $200 and $300 per night. She’s gotten out of the industry permanently, she said, and is making opal jewelry that she sells primarily on Etsy.

“Anybody who is a server knows you will put up with frustrations. That’s just part of the service industry,” she said. “But interactions of humans now in general are so much worse since the pandemic. People didn’t snap out of survival panic mode.”

With so many restaurant workers pivoting to other industries perceived as less stressful, restaurant owners have had to offer higher salaries, signing bonuses and other perks to entice potential workers. This all requires more money.

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Early in the pandemic, the federal government helped the industry with two rounds of Paycheck Protection Program loans that were forgivable for eligible restaurant owners. More recently, the American Rescue Plan Act established the Restaurant Revitalization Fund to help restaurants keep their doors open.

That program funded more than 100,000 restaurants with a total of $28.6 billion in grants. Roughly 200,000 eligible restaurants applied and didn’t get funding because the money ran out, according to Sean Kennedy, executive vice president of public affairs for the NRA. His organization and the Independent Restaurant Coalition have been advocating for a replenishment of that fund, saying that because of how it was administered by the Small Business Association, it arbitrarily created winners and losers — rendering those losers unable to compete as effectively for workers.

There has been no mention of replenishing this fund or further assistance to the restaurant industry in the infrastructure and reconciliation packages currently being considered in Congress. While individual members of Congress have raised concerns about the future of restaurants and the speed with which federal funds for them ran out, in general, new covid relief isn’t being discussed.

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Lawmakers and industry experts anticipated the end of enhanced unemployment benefits would push more workers back into the restaurant sector.

That has yet to pan out, said David Henkes, senior principal at market research firm Technomic. Even in the face of higher pay and enhanced benefits, many younger people are finding other jobs in retail, the gig economy or logistics jobs at operations such as Amazon fulfillment centers, he said.

Henkes said he was worried that this summer’s surge in restaurant-going may have been an “artificial sugar rush” of pent-up demand.

Still, restaurateurs note that August and September tend to be among slowest months for many restaurants around the country. They say the previous seven consecutive months of staffing growth, along with rising vaccination rates, the easing of the covid cases, and the holiday season ahead of us, provide some reasons for optimism.

Andrew Van Dam and Tony Romm contributed to this report.

Source: Washington Post

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ROHIT SHENOY

ROHIT SHENOY

Rohit led product strategy at Toast for it's Online Ordering, Self-Ordering Kiosk and Inventory Products. As one of Toast's earliest product managers in 2015, he worked closely with small operators and restaurant groups to understand how technology could help them increase profitability and operational efficiency.

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