Possible Tax Increase to Pay for Social, Climate Spending
Threatens Restaurants. In an effort to offset costs for climate and social spending, Congress is considering expanding the NIIT. Established under the Healthcare and Education Reconciliation Act of 2010 (but in effect since 2013), the NIIT is 3.8% for 2022. If the tax proposal passes as part of the Inflation Reduction Act of 2022, up to $252 million would be generated from one million small and family-owned businesses, forcing some restaurants that are still recovering from COVID-19—and now struggling with inflation, supply chain disruptions, and a labor shortage—to close. Currently, the NIIT applies to “passive income,” such as rental property or stock dividends. Some members of Congress would like to extend the NIIT so that it applies to “active income” earned by individuals and families who run their own businesses. Specifically, the increase would be imposed on what are considered “pass-through” businesses, including partnerships, LLCs, sole proprietorships, or S-Corp. entities earning more than $400,000 a year or $500,000 for joint filers. Small and family-owned restaurants would be greatly affected.
Summer Slowdown Continues for Restaurants
As record-high inflation keeps consumers questioning spend. Restaurants are experiencing strong headwinds as the industry hits peak summer season, according to data from Black Box Intelligence. In response to inflation hitting a new 40-year high in June, consumers are, predictably, watching their wallets with extra scrutiny as gas, groceries, rent, restaurant prices and more continue to rise. Although sales and traffic for the summer were expected to come up short against last year’s pent-up COVID-19 demand (a windfall for restaurants after an intensely challenging 18-24 months), U.S. economic conditions continue to strain restaurant performance in every segment except for quick service. Year-over-year guest counts have now been in a decline since March, impacting sales and traffic. Same-store sales growth was +1.6% in June — a sharp decline from the +4.9% reported for May and the lowest it has been since February of 2021. Same-store traffic growth also fell, but by a smaller margin than sales. Traffic growth was -4.8% in June — down from -2.9% in May. For the first time in over a year, segment frontrunner fine dining experienced its biggest drop in sales growth for the month of June. Upscale casual also saw a steep decline compared to May 2022. Quick service was the only segment to experience year-over-year sales growth in June. While fast casual also saw a small decline in year-over-year sales growth, the segment managed to take the lead as the best performing segment in same-store sales growth.
Some Restaurants See a Cautious Consumer
Others, not so much. Are consumers changing their dining habits because of an apparently looming economic recession? The answer probably depends on the restaurant. Industry executives on earnings calls and in interviews have given a wide range of answers on the impact of the economy on their consumer. Their answers suggest lower-income diners are pulling back or searching for value, but everybody else is fine. “It is a weird time,” Tom Stager, CEO of the 290-unit Krystal, said in an interview last week. He said his chain’s volumes are maintaining, though he admits it’s difficult to keep pace with last year’s stimulus-fueled sales. And it often varies from day to day or week to week. “We do feel a diversity when it comes to customers,” Stager said. “Some days are up; some days are down.” Several executives have mentioned the state of the low-income consumer, saying they are cutting back. “In terms of the global consumer, we do think they’re getting more cautious,” David Gibbs, CEO of Yum Brands, told investors last week. His company owns KFC, Taco Bell, Pizza Hut and Habit Burger, making him as much of an authority as anyone on the fast-food consumer. In the U.S., he said, “the low-income consumer pulling back has become more pronounced. We’ve seen that in our business and we’re reacting accordingly.”
Restaurants Can Optimize Revenue
With “Pay By Text.” Restaurants have been making a comeback while a global pandemic still clutches owners, staff, and customers. Now is a critical time for restaurants to embrace the contactless, digital tools that earn revenue. Luckily, those tools already exist, enabling restaurant owners to save money, expedite contactless set-up and payments, and even fulfill customer orders directly (no outside delivery app necessary) on platforms that stay in-line with the restaurant’s brand image. Recent industry studies have reported that 63 percent of restaurant consumers prefer to order delivery directly from restaurants, mostly due to the excessive customer fees associated with third party ordering apps. (Source: Sense360) Owners can take advantage of tools that exist at no cost to the restaurant while enabling them to bring in dollars without turning tables. Restaurants can even deliver a simple text message to accept customer payments instead of taking credit cards over the phone while others wait on hold. The digital solutions mean a kitchen becomes the source of revenue – with less hostess, server, busser, or other overhead costs. Customers benefit from the delicious options just as much as restaurant owners. Throughout the customer’s dining journey, there are a number of places where a restaurant can leverage contactless messaging to strengthen customer relationships and modernize operations. A selection of those benefits include:
Five Ways to Utilize a Wi-Fi Hotspot
To generate immediate restaurant revenue. Building and maintaining a successful restaurant business isn’t easy. There are a thousand tasks in every day, and very few are planned. But one thing is a universal truth: Without customers at your tables, you will fail. Customers come in many forms, so often the focus is on new customers, but the reality is that repeat, loyal customers are really the starting point. A repeat sale is 30 percent the cost of attracting a new customer, and repeat customers are walking advocates / marketers to new customers, ultimately generating more revenue–and reliable revenue–for less cost. So how can a restaurant drive revenue without time-intensive and costly marketing initiatives? With these tough times innovation is required, and restaurants are seizing the opportunity to turn simple Wi-Fi into valuable guest engagement and ultimately a competitive advantage to drive guest loyalty and provide immediate revenue growth. One way to access the Wi-Fi is by logging into social media for the free access. This is a win-win since the CMO Council identified that 56 percent of social media users will log in with their profiles in exchange for a customized brand experience. However, the customer’s device also has a unique identifying number—a MAC address—that identifies who the customer is. When the customer logs onto the Wi-Fi, specific details can be tracked such as length of time in the establishment, the days of the week and times of the visit, number of times the customer visits or whether they’re a first-time visitor or repeat customer. This information allows restaurants to generate more revenue through the following five ways:
Is It Time For A Restaurant Facelift?
Some things you should know before starting a restaurant facelift. If you have a successful restaurant that has been open for 7 or more years and business is good, then you are already on the right path. But there comes a time, when you want to start thinking about re-investing in your own business. With new restaurants opening up all around you, as a restaurant owner, you need to make sure you stay relevant. When it comes time for a refresh or remodel, stay ahead of the curve. If you wait until it looks like it’s time to renovate, you’ve waited too long. Industry experts recommend a restaurant facelift every five to seven years to keep your business relevant and to compete with all of the new restaurants that open. Depending on the type of restaurant you own, a renovation investment can be as low as five thousand dollars or as expensive as hundreds of thousands of dollars. Timing is everything. Don’t wait until your restaurant is dated and worn before you renovate. Planning and knowing ahead of time what work needs to be done can help you define the scope of the work and develop a budget you can afford. Define who your customers are or the target customer you want to attract. Analyze demographic trends in your area that might expose a change in the population, age, employment, income, etc. Decide on a design that attracts the right customers for your business.
Ghost Kitchen Calculator
See what income your ghost kitchen can produce. Ghost kitchens are touted as a way to launch a restaurant with low overhead costs. This calculator can help operators assess the financial profile and determine the feasibility of a ghost kitchen before developing their own concept. Thinking about developing a ghost kitchen business plan? Use this calculator to crunch the numbers and determine profitability. For this story, Restaurant Dive used an economic model created by Dan Fleischmann, vice president at Kitchen Fund, an investor in the emerging restaurant sector. To create this model, Fleischmann leveraged his expertise assessing thousands of restaurants and his diligence of leading ghost kitchen providers and its tenants to build a tool for restaurant operators considering a ghost kitchen.
Did You Know?
Tequila is experiencing a bit of a renaissance. What was once considered a party liquor has quickly become one of the country’s favorites, with sales climbing more than 30 percent between 2020 and 2021, per the Distilled Spirits Council. The only category that outperformed tequila was premixed cocktails, which were helped by pandemic-related demand. Coupled with tequila’s surge is the rise of mezcals, another spirit made from agave. While tequila must be made from blue agave and produced in a designated region of Mexico, mezcal can use a variety of agaves and is produced in a separate region in Mexico. Mezcals are usually described as having a smokier flavor than tequilas. Discussions around such differentiations are becoming more commonplace.
Chick-fil-A announces new community scholarship program. Today, Chick-fil-A, Inc. opens applications for its newest education initiative, Chick-fil-A™ Community Scholars. This new scholarship program will award 12 scholarships of $25,000 annually to community service-minded leaders, helping them pursue their goals through furthering their education. Recipients will also have the opportunity to participate in a one-year leadership development program. he Chick-fil-A Community Scholars program is an expansion of Chick-fil-A’s existing education initiatives – including the Remarkable Futures™ Scholarship program, which has awarded more than $136 million to more than 80,000 Chick-fil-A® restaurant Team Members through its Leadership Scholarships and True Inspiration™ Scholarships. The Chick-fil-A Community Scholars program is an extension of Chick-fil-A’s commitment to care for people and its communities by providing service-minded students of any age with opportunities to help them pursue their academic passions.
Bielat Santore & Company – Restaurant Industry Alert
LIQUOR LICENSES FOR SALE
Dunellen “Broad C” License Asking $399,000
Berkeley Township “C” License Asking $295,000
South Amboy “C” License Asking $175,000
Eatontown “C” License Asking $1,500,000
We track every liquor license in the State of New Jersey. Need a license – we can find one!
Call 732.531.4200 for additional information
We invite you to visit our website, where you will find all our current listing inventory, a library of helpful industry resources and a collection of client testimonials expressing their assessments of our work and our service within the restaurant industry.
A voice for our industry. If you are finding these weekly bulletins informative and beneficial during this pandemic, we kindly ask that you write a brief Google review providing a vote of your appreciation. Simply Google “Bielat Santore & Company” and when the company name appears click the button on the right to write your review or if you don’t use Gmail, go to Google Maps, type “Bielat Santore & Company” – Allenhurst, NJ into Google Maps; scroll down and you will see an option to leave a review.