Everyone is Feeling the Impact of Inflation
Inflation experiences have intensified for consumers in every state. Restaurants and customers are feeling the effects of inflation, according to the third quarter 2022 data for the Yelp Economic Average (YEA) report, The report reveals that inflation experiences have intensified for consumers in every state in the U.S. year over year, with reviews mentioning inflation up by 22 percent compared to Q3 2021. Yelp found that food businesses are seeing one of the largest increases of inflationary experiences compared to Q3 2021, followed by restaurants. In response, consumer searches for budget-friendly dining and grocery options are higher than Q3 2021. Consumers report experiencing inflation the most at food businesses and restaurants, with inflation mentions in reviews up 31 percent and 28 percent, respectively year over year. Of all Yelp restaurant categories that saw an increase in inflationary experiences, a quarter of them serve Asian cuisine, with a 24 percent average increase of inflation mentions from Q3 2021. Additionally, grocery stores and markets make up four of the top five food businesses with an increase in inflationary mentions in reviews compared to Q3 2021. Food businesses primarily selling desserts also saw a 29 percent average increase in inflation mentions compared to Q3 2021. Yelp data shows that food businesses and restaurants across the country have seen some of the highest increases in inflation.
As Inflation Rises, Restaurants Look to Gift Cards
To attract newly cost-conscious consumers. Recent economic data forecasts a stormy season ahead for restaurant owners. Inflation in the U.S. is holding around eight percent, which is causing the cost of eating out to rise alongside price increases for everyday items such as gas and groceries. As business owners know well, when inflation rises consumers often cut discretionary spending. For restaurants, this presents a challenge: How can you keep attracting customers to your restaurant when consumer purse strings tighten? As consumers reevaluate their spending habits, one lever many restaurants are turning to is the gift card. Whether plastic or digital, gift cards can be connected to promotional offers, discounts and incentives. These add-ons give consumers the ability to stretch their spending power when money gets tight. According to the Q2 2022 Gift Card Gauge from Fiserv, 37 percent of consumers say they have already taken advantage of a gift card promotion in 2022, and 58 percent say that gift card promotions will motivate them to buy more gift cards during this inflationary period. Additionally, while 51 percent of consumers say they are significantly reducing their impulse shopping and 46 percent are purchasing only what is necessary due to inflation, gift cards remain resilient, with only 23 percent of consumers purchasing fewer gift cards. With consumers increasingly viewing gift cards as a way to stretch their purchasing power, savvy restaurant owners are marketing new gift card offers to their customer base. Restaurants wanting to invest in their gift card programs can consider adopting these strategies.
Why Onboarding Innovation is the Key to Fighting Restaurant Turnover
Hospitality is facing its biggest challenge yet. Some incredibly frustrating phrases that seem to come from every customer’s lips in 2022 sound a little like this: “Why is the service so bad?” “Where are all the staff?” “Can somebody make me a drink around here!” Hospitality is facing its biggest challenge yet: the great resignation of 2022. And the turnover levels clearly illustrate the tricky situation that we are in. Before 2020, there was a comfortable inventory of nearly 14 million openings, with hospitality making 10 percent of jobs available in the United States. However, since then, 3.5 million Americans have left the workforce to pursue more independent means of financial stability, and a third who walked out the door were hospitality workers. Those within an industry that could not work from home had to find other means of ensuring food arrived hot on the table each night, and many kissed the bar-life goodbye forever. In the summer of 2021 came the grand reopening of the economy—and suddenly, there were more job openings than jobseekers to fill within the hospitality sector. The situation became dire for venue owners, and everybody kept asking ‘why don’t people want to work?’ Why didn’t people want to return to bar or restaurant work when they could again? After all, perhaps you had a favorite waiter at your local diner who suddenly disappeared after serving you every day for ten years. They seemed happy. Where did they go? And why? Let’s unpack that…
Additional Service Fees Risk Turning Off Customers
And employees. “Is this a tip? Are we supposed to tip on top of this?” I overheard this familiar refrain coming from the table next to me as the couple tried to figure out how much, if anything, to write on the gratuity line. With a 20% “service fee” automatically added to the bill, the confusion was easily understandable. Just seconds earlier I was having the same conversation at my table and decided to wait and see what the couple next to me did before I made a move. They ultimately concluded that the service fee was indeed a tip, jotted down a $0 and quickly left before the server returned, probably feeling a bit uneasy about going against the social norms of tipping. Was this “service fee” actually a tip? Was the uncomfortable mixture of guilt and embarrassment I was feeling unnecessary? It was hard to know because the description of the fee on the menu was intentionally vague. What I do know is that I complained about this experience on my entire thirty-minute walk home (and am now writing about it eight months later), and I imagine many other guests did the same. This is not the lasting impression a restaurant wants to leave on their guests. However, as operators are looking for creative ways to absorb increased costs including for labor, some have understandably turned to add fees to the bill. Small fees of around 3% may be palatable to some consumers if it’s clear what the fee is used towards, for others it can leave a negative impression.
Diner Demand for Restaurants Higher than 2021
Consumer sentiment may help sustain restaurant demand. Fifty-eight percent of diners are eating restaurant food more this year than in 2021, a Popmenu survey of 1,000 customers conducted in September found. Most customers are willing to pay higher prices to keep restaurants open, at least in the short term, with 68% of diners reporting they would accept menu prices, per the survey. While this study indicates strong demand for restaurants, YipitData research provided to Restaurant Dive shows lower-income diners are trading down or reducing spending, with sales falling among diners making less than $45,000 annually. A drop in traffic among lower-income consumers has been evident for some time, with a study from The NPD Group finding that a quarter of lower-income households didn’t eat out at all during Q2 2022. But Popmenu’s data includes some information about what factors are drawing customers to restaurants despite pricing pressure. “While mindful of their own household economics, 61 percent of consumers said they would pay more to keep restaurants open if a recession hits in 2022 or next year,” Brendan Sweeney, CEO and co-founder of Popmenu, said in the statement. “That says a lot about how important restaurants are to their local communities and how much people rely on and empathize with them.”
Don’t Apologize for a Bad Yelp Review
Advice to restaurant owners. Remember Anton Ego – the aptly-named villainous restaurant critic in the animated film Ratatouille? His scathing review of Chef Gusteau’s restaurant debatably contributed to the chef’s death. It was only the delicious food prepared by Remy – he was the rat – which saved the day for the celebrated Parisian eatery. Ego represented a cohort of food critics that dominated the restaurant industry for centuries. But where are those food critics today? Sure, there are still a few around. But most of them have been crowdsourced by review sites like Yelp. Yelp has become the place where people get their food reviews. And not just food. It’s retailers and services too. The site reportedly has logged 184m reviews worldwide and 178m unique visitor each month. Some 45% of people will check a Yelp review before visiting a business. That is great power. But with great power comes great responsibility. And media attention. Yelp has become so powerful that fights between business owners and their unhappy patrons become legendary – and oftentimes go viral. I like these fights. And I’m always rooting for the business owner. Be nice, they say. Be professional. Respond courteously. Take responsibility. Acknowledge the complaint and show the public that you’re aware of the problem and will address it. But is this really good advice? No, it’s not. My advice: stand up for yourself and fight.
High-End Restaurants and Bars are Growing their CPG Lines
With super fans in mind. Restaurants and bars are grappling with how best to expand sales beyond their four walls — mainly by offering branded products to online shoppers. E-commerce stores were just one of a number of lifelines that restaurants and bars turned to during the pandemic when dine-in business dried up overnight. While most of these dining businesses have experienced a return in visitors, many are still in recovery mode and planning for the future. In turn, hospitality establishments like Death & Co. and Eleven Madison Park are trying to diversify their business models with new products and services targeting super fans who can’t afford to visit regularly. The idea behind building out these online stores is to offer a taste of relevant products people can’t get anywhere else. The strategy also acts as a marketing tool. While these e-commerce stores aren’t likely to be large revenue drivers for these restaurants, they are still important for generating hype among new and existing fans wanting a taste of these sought-after places. However, e-commerce operations are also time and resource intensive to grow alongside the dine-in business. Profitability is top of mind for many establishments. For instance, this year cocktail bar Death & Co. expects to generate about $500,000 in online store sales at 10% net income.
The Company Once Known as Restoration Hardware is Opening Restaurants
Why? On a recent night at the Dining Room at RH Guesthouse New York — a restaurant from the home-design company formerly known as Restoration Hardware — the server began her tableside spiel with a paean to the surroundings: “Welcome to our very beige space.” The room, she explained, was built from white oak and Italian travertine. Each table, chair and light fixture was custom made. The hearth was carved from a single slab of stone. Creating the space — which looks like a high-end art museum without any of the art — took nearly seven years, she said. The food got a brief mention. There’s a grilled avocado topped with caviar ($52); a burger with cheese and caramelized onions ($38); and a grilled maitake mushroom served over fried potatoes ($36). Most of it was enjoyable. Not much was memorable. RH has opened 15 of these restaurants across the United States and Canada in the past decade, most of them connected to stores, and they have clearly resonated with diners, many of them drawn by the décor. Each restaurant earns an average of $10 million annually, said Gary Friedman, the company’s CEO. (That’s more than 10 times the annual sales of a typical restaurant in the United States, according to a 2022 report from the National Restaurant Association).
Did You Know?
Why personalized mobile ordering is the future. In the United States, over 17 million people Google the phrase “food near me” every month, which ranks it as the 16th-most searched phrase in 2022, while over 10 million people Google “restaurants near me” every month. Searching for your next meal online has never been more popular, but consumers are encountering an unforeseen barrier to ordering where, who and what to order. With so many options available, it’s becoming harder to make that decision. Personalized mobile ordering apps like Availyst aim to answer the question “what’s for dinner?” by learning consumer preferences and directing them to personalized food options. It’s come up with a new technology that aggregates data across food discovery apps and services to show local food options to consumers. It’s the first personalized search engine for food discovery to organize a cluttered online space and make things more convenient for consumers.
Advocates press Congress to support restaurant workers’ Bill of Rights. Food-service workers and their allies are calling on Congress to support the new “Restaurant Workers Bill of Rights,” a document calling for higher wages, better working conditions and access to health care. The movement urged Congress to raise the federal minimum wage for tipped workers, which is $2.13 per hour and is the standard in 17 states. The bill of rights calls for legislation to guarantee paid time off, sick leave, consistent schedules, health insurance benefits and the right to form unions. Opponents of federal legislation cited concerns about the cost and argued it is up to individual states to set and enforce labor protections.
Bielat Santore & Company – Restaurant Industry Alert
TWO NEW FAST-FOOD RESTAURANTS COME TO MARKET
Ocean County, New Jersey family owned and operated Breakfast & Lunch Café; year-round operation with (60) year track record; completely turnkey; high cash flow business has afforded the owners the opportunity to sell and retire early; a steal at this price!!! sale includes property – 2,200 total square foot side by side condo units; beautifully appointed banquet/additional dining room; ample parking;. seeking energized operator to take solid business to the next level; financing available to qualified.
Click here for preliminary information
Call Robert Gillis, Bielat Santore & Company 732.673.3436 for more detailed information
Middlesex County, New Jersey fast-food restaurant; turn-key business and building available; impressive track record 50+ years in business; corner location in bustling area; 3,600 SF over two floors; 1st floor in its entirety houses the restaurant equipped with walk-in refrigerator, freezer, ice machines, full line, POS system; 2nd floor is currently being used as storage but could be converted to office/restaurant space; financing available to qualified.
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Call Dan Lynch, Bielat Santore & Company 973.886.4411 for more detailed information.
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