Restaurants are Once Again a Hot Commodity for Buyers in 2022
Rising interest rates – increased costs create financial challenges when looking to purchase a business. The last two years have been a roller coaster for the restaurant industry as the coronavirus pandemic shut down much of the industry in 2020 and restaurateurs looked to get back to normal in 2021. In 2022, the restaurant market is finally rebounding and for many investors, it’s the perfect time to purchase an existing location. However, the past two years have left many restaurant owners in a state of exhaustion. They made it through COVID shutdowns and are now dealing with lingering staffing issues. Owning a restaurant has become too much for many sellers and because of their fatigue, are needing to sell. Some owners who may have had plans to sell in 2020, were forced to put those plans on hold and work the business through the pandemic. With signs customers are returning to feel more comfortable going out to restaurants, many owners see this as the much need opportunity to sell. In the current market, buyers are looking to capitalize on the fatigue and purchase a functioning restaurant with staff in place and an existing consumer base. There are concerns for prospective buyers. Rising interest rates and increased cost of goods create financial challenges when looking to purchase a business.
Small Business Owners Struggle with Burnout
The onslaught of non-stop challenges. The onslaught of non-stop challenges over the last two years — from pandemic restrictions and staffing shortages to inflation and rising gas prices — is taking a toll on small business owners, according to a new survey from Podium, a technology platform that serves more than 100,000 local businesses in the U.S., Canada, and Australia. Just over 7 in 10 owners (72%) feel burned out from the pandemic’s impact on their business, according to the survey. Inventory shortages, the lack of separation from work and home, and challenges communicating with customers ranked among the top pandemic-related issues, according to the survey of 1,001 small business owners done in partnership with Censuswide (fielded May 23 to June 6). Owners also cited inflation (48%) and rising gas prices (39%) as two top threats to their businesses. The survey showed that staffing remains a sore point, with 40% of owners hesitant to hire due to the rising minimum wage and 42% saying there is a shortage of workers with the skills they need. Faced with persistent pressure, many owners are losing their inherent hopefulness. The National Federation of Independent Business said its Small Business Optimism Index hit the lowest point ever recorded in June, with confidence at a 48-year low.
Evaluating Labor and Supply Chain Issues
Best practices for fast-casual restaurants. If you’re involved in any aspect of the Fast Casual category, you don’t need me to tell you that labor and distribution issues are real. We all also know that there is no silver bullet that will course-correct the struggles faced by owners and operators. The landscape has changed since the pandemic, and as restaurateurs, we need to push the bounds of innovation to develop short and long-term solutions to the things keeping us up at night – staffing and supply chain challenges. Today’s workforce seeks out a corporate culture that creates a unique environment and sense of community. Your employees want to be a part of a business that takes an interest in them and doesn’t simply demand the completion of a set of workplace tasks. From operations to customer service, you need to invest in your staff. They are absolutely your most valuable resource. Challenges in supply chain and distribution mean that ingredients readily available one week might not be available the next. Here are two ways franchise brands are helping address today’s labor and distribution challenges.
Pros and Cons of Open Kitchens
In the Restaurant Industry. The open kitchen concept has become one of the biggest trends in the restaurant industry. When people walk into a restaurant, food transparency is what matters the most. An open kitchen makes the understanding of the whole food production process really simple. However, it is still a matter of discussion whether an open kitchen is good from an operational standpoint or not. Talking realistically, a few restaurants like to be 100% transparent about their processes with the public. Restaurants have opted for various technologies to make the whole concept of open kitchens absolutely comfortable for the diners. One such technological adoption is the commercial kitchen ventilation system. It includes both air exhausts as well as replacement air facilities within the cooking area. As consumers increasingly become health conscious, their interest in clean label foods is rising significantly, especially plant-based alternatives. Naturally, when they dine out, they are interested in knowing whether the food served is prepared using animal or cruelty free ingredients, further broadening prospects for open kitchens. In this blog, we will discuss the pros and cons of open kitchens in the restaurant industry and how the restaurants are offering the best possible experience to their diners.
Consumers Spending 40% of Food Budget on Restaurants
Restaurants play an important role in everyday life. Consumers are still dining out despite rising costs and inflation, spending 40% of individual or family food budgets on restaurants each month. That’s the finding from a Popmenu survey of 1,002 consumers in May 2022, according to a press release. When ordering online, one-third (33%) of consumers spend $50 or more per order on average. More consumers are transitioning from delivery or carryout only back to on-premise dining. Approximately 45% of consumers eat in restaurant dining rooms at least twice a week. As budgets tighten, consumers said they are more likely to pull back on other purchases such as new clothes, travel and gym memberships before reducing their restaurant spending:
- New clothes – 44% of consumers.
- Travel – 42%.
- Gym membership – 33%.
- Ride services (Uber, Lyft, taxis, etc.) – 33%.
- Streaming subscriptions (Netflix, Peacock, Hulu, Prime Video, etc.) – 30%.
- Other entertainment (movies, sports events, concerts) – 29%.
- Personal grooming (hair/nail salon) – 27%.
Popmenu also found that 29% of consumers believe it’s cheaper to order restaurants than buy all the items needed to cook a meal; 27% said it costs roughly the same without all the work.
Restaurants Can Fight the Bite of Chargebacks
Chargebacks in the restaurant business were comparatively rare. So, what changed? Like any business, you may occasionally have to deal with an unhappy customer. Traditionally, this has meant that the manager comes out and apologizes to the guest, then offers a discount or a comped meal. This system has worked well enough in the past. However, a lot has changed in the last four or five years. Widespread adoption of branded apps, online ordering and delivery, accelerated by the Covid crisis, has forced restaurants to deal with an issue that they’ve mostly avoided until now: chargebacks. Historically, restaurant chargebacks typically happened when a guest found something wrong on their credit card statement, such as being double charged or having an unauthorized tip added to the bill. Instead of calling the restaurant, the customer called the bank and had the payment reversed. The merchant then loses the dollar value of the meal and has to pay fees and other costs resulting from the chargeback. The digital era has had a huge impact on the food and beverage space. Being able to order online and have dinner delivered opened new doors of opportunity for eating establishments. Larger chains created their own mobile apps. Local eateries often got in on the game by working with third parties to facilitate delivery services.
Supermarkets, Restaurants Hire Security
Limit hours to combat crime. Restaurants and grocery stores said they are revamping operations in response to crime, with some operators limiting hours, spending more on security and closing stores entirely. Starbucks Corp. last week said that it was permanently closing 16 U.S. stores after workers reported incidents related to drug use and other disruptions and would likely close more. Casual dining chain Noodles NDLS 0.19%▲ & Co. has encountered drug use in bathrooms in certain markets, and is training workers on how to respond, Chief Executive Dave Boennighausen said. Supermarket giant Kroger Co. last year listed organized theft among the factors pressuring its profit margins for the first time. During an internal forum at Starbucks’s headquarters Wednesday, interim CEO Howard Schultz said the stores were profitable, but the company was closing them because of employees’ safety concerns. “We are facing things that the stores weren’t built for,” Mr. Schultz said. “We are listening to our people and closing stores.” He said local governments must do more to fight crime and mental illness as the need to address safety has grown.
Did You Know?
Inflation soars to 9.1% as fuel, shelter and food prices climb. U.S. inflation soared to its highest level in nearly 41 years last month with consumer prices 9.1% higher than they were in June of 2021, according to the latest federal data. The Consumer Price Index’s annual reading for the 12-month period ending in June was even higher than May’s annual rate of 8.6%, according to the U.S. Bureau of Labor Statistics. Viewed on a month-to-month basis, the 1.3% increase in consumer prices in June showed inflation accelerating from the previous 1% monthly increase in May. Price increases were broad-based with gasoline, shelter and food being the largest contributor. Gasoline prices soared 11.2% over a one-month period in June following a 4.1% increase for the month of May. Over the past 12 months gasoline prices have risen 59.9%. The broader energy index, which includes the cost of electricity and natural gas, rose 7.3% over a one-month period in June after a 3.9% increase in May. The index rose 41.6% over the 12-month period ending in June – the largest 12-month increase since April 1980. On an annual basis, the cost of fuel oil is up 98.5%, electricity is up 13.7%, and natural gas is up 38.4% from June of 2021. Food prices rose 1% last month and are 10.4% higher than they were in June of 2021.
Continual training is a game-changer for restaurants’ success. By now, America’s entire workforce is familiar with the ongoing labor shortage. It’s taught restaurants that the future of work depends on how well employees are trained and what companies are doing to retain talent. Some 4.3 million people quit or changed jobs in December 2021 during what has come to be known as the “Great Resignation.” A new Pew Research Center survey found that 63 percent of workers who quit a job in 2021 said that “lack of opportunities for advancement” was a major reason for why they quit. That’s why companies have to start investing in their employees’ growth. Now more than ever, restaurants need to level up their continuous training efforts to prove they want their employees to grow. Here are three ways restaurants can do that and, in turn, boost employee retention.
Bielat Santore & Company – Restaurant Industry Alert
ATLANTIC CITY, NJ “SPORTS BAR – RESTAURANT” FOR SALE
Photo shown to illustrate “sports bar” only. Not actual representation.
Turn-key Atlantic City, NJ restaurant/bar; strategically located on strip near hotels and casinos; 3 floors; 1st floor – 100 seat dining + 75 seat bar/lounge; second floor – 100 seat private party room + 30 at bar; third floor – office/residence; on-site parking for 50 cars; owner retiring after 40 years in business; financing available to qualified.
Contact Richard Santore, 732.531-4200 for additional information.
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