What Restaurant Operators Can Look Forward to in 2023
Expect more stability. I have been involved in the restaurant industry for more than two decades, first as a sell-side analyst covering public companies and then advising them how to navigate the capital markets from a communications standpoint and craft effective investor relations programs. In working with leadership teams running companies of varying sizes, models, and market caps, and within different segments of limited and full-service dining, I have long appreciated the diligent work involved in successfully operating these businesses day to day — even in the best of times. But my admiration has been even more heightened over these past few years — first in how they managed through the pandemic itself and then more recently as they have entered a “post” Covid environment that has presented its own set of challenges. The good news is that having already weathered so much, the restaurant industry has landed on relatively solid ground — even if we were to enter a mild economic recession. Overall, restaurants are better capitalized than at any point in recent history, more operationally efficient (by necessity), and in many cases managing a stronger footprint, having already pruned the weakest units within their portfolios during the darkest days of the pandemic. With this in mind, here are some considerations heading into 2023 — which, in my view, all point to a period of “stability.”
What Exactly is Dynamic Pricing for Restaurants?
We asked more than 100 operators for their definition. Essentially, dynamic pricing is all about prices varying based on demand. But that’s just the start of the conversation. The results from my recent survey are in and in this series of articles we’ll be talking about some of the findings. We had a total of 118 respondents who shared their definitions of dynamic pricing, their thoughts on where dynamic pricing had the most potential, the potential challenges they foresaw. and talked about the likelihood that dynamic pricing would be adopted in the industry. Before I begin talking about the survey results, let’s start off with the bigger picture. Dynamic pricing has become quite the hot term lately, but what exactly is it? When I go back and look at pricing from a revenue management perspective (something I’ve been doing for over 30 years), there are two fundamental pricing questions that need to be addressed: One, what prices should be charged? And two, how to determine who pays which prices? Answers to both questions are equally important, but I would argue that even if the prices aren’t exactly optimal, a company can achieve significant revenue increases from having a reasonable (as in OK) set of prices if they’re able to do a good job of segmenting their customers (as in determining who gets which price). Let’s start off with what prices should be charged. That’s essentially what dynamic pricing is all about. So, what is dynamic pricing? I asked just that question in my recent survey. Over 100 people responded. Pretty much everyone thought that dynamic pricing means that prices vary based on demand, but they had all sorts of thoughts on what that meant. The responses ranged from quite general (“changing prices based on a number of factors”) to quite specific (“personalized prices … served up to a consumer”).
Restaurant Payment Fraud
Who is liable? Global financial losses from card fraud are truly staggering. A recent Nilson report projects that over $408 billion will be lost over the next decade. Credit card fraud in the UK is currently running at a five year high, according to Forbes. Restaurants (just like anywhere that accepts card payments), have always been a target. However, much changed for food service businesses throughout the peak of the pandemic. In its wake, plenty of those changes remain. During lockdown periods, food service businesses were forced to adapt or die. Many embraced takeaway delivery services and had to establish new ways to process customer payments from a distance. This exposed restaurants to a much higher number of “card not present” transactions, which account for 80% of card fraud losses. What’s particularly interesting is that consumer habits learned in lockdown have stuck. According to a study by the British Takeaway Campaign, 32 percent of people said that they would continue to order more takeaway food following the pandemic. 31 percent said that they would “eat out less in the future”. The pandemic isn’t over, and while a Friday night walk along a high street may convince some that things are “back to normal,” plenty of people have changed their habits – possibly permanently.
Hiring Activity Slows for Small Restaurant Owners
11% of small restaurant owners are reducing their staff this month. New data from Alignable shows that 11% of small restaurant owners are reducing their staff this month as layoffs and hiring freezes become more pervasive across industries. This marks a 5% jump in restaurant staff reductions from November. Further, the 44% of restaurant owners who say they are still hiring report trouble finding the right workers. The report shows that twice as many small business owners across industries – 15% – are laying off employees in December versus November. Employers note they can’t afford to hire full-time, permanent staffers as inflation persists, as labor costs exceed revenue, and with the potential of a recession looming. Though there have been some signs of inflation peaking, it remains the biggest challenge for business owners. In fact, 64% of small employers say inflation continues to negatively impact their business and has hindered recovery efforts from Covid-related impacts. Just 14% of small business owners believe they have fully recovered from Covid, which is down from 24% in October and 43% year-over-year. This response is echoed by a recent study from J.D. Power, which finds that 65% of small business owners say inflation has had a severe or major impact on their business.
Study Says Most Consumers Want Holiday Meals Made by Restaurants
Convenience is key. As the song “(There’s No Place Like) Home for The Holidays” goes, “I met a man from Tennessee, he was heading for/ Pennsylvania and some homemade pumpkin pie.” Such is the stereotypical view of the holidays in the U.S. – especially those tremendously gustatory fall and winter holidays Thanksgiving and Christmas – that folks will be cooking at home, be it their own, a relative’s, or a friend’s. People have fond memories of dishes made year after year by loving hands and family food traditions that bond them to loved ones. A 2020 poll conducted by YouGov revealed the dishes that Americans clamor for at the Christmas table. Topping the list are two types of potatoes, roasted and mashed, then turkey, of course, followed by holiday stalwarts like stuffing, rolls, prime rib, and ham. There are even some eclectic choices in the top 20, like lasagna and potato salad. But the idealized home-cooked holiday meal may be just that: a lovely ideal. Behind the scenes, as anyone who has spent time in the kitchen before one of these feasts will tell you, is a flurry of activity and anxiety as a harried cook – or cooks – attempting to get each dish done on time. While there are many ways to plan ahead and mitigate the stress of cooking, such as Ina Garten’s tried-and-true turkey tip and appetizer hack, it seems that many Americans are choosing an alternative to cooking.
Father and Son Restaurant Team Are Sentenced for Cheating
On their PPP applications. A father and son who run a restaurant and catering operation in North Carolina have been sentenced to jail time for defrauding the Paycheck Protection Program (PPP) out of $1.7 million. Izzat Freitekh, 57, and Tarik Freitekh, 35, were sentenced to 36 and 87 months in prison, respectively, after being convicted of submitting multiple fraudulent applications for PPP loans, which were intended to help businesses stay afloat early in the pandemic. The two misstated the number of employees and the size of the payroll their businesses had supported before the crisis, according to the U.S. Department of Justice. Those businesses included a restaurant in Charlotte, N.C., named La Shish Kabob, a catering company called La Shish Kabob Catering, and a second caterer called Green Apple Catering. In addition, the pair diverted at least a portion of the $1.7 million they collected for personal use, Justice said. For instance, the department said in a press announcement, $30,000 was given to family members for their use. Justice said it recovered $1.3 million from the Freitekhs and distributed it to other PPP applicants before scammers were sentenced. The defendants were convicted in March but not sentenced until Dec. 6.
Employee Retention Tax Credit (ERC)
3 tips to plan now for tax season. When the Covid-19 pandemic began, and businesses were forced to shut down their operations, Congress passed programs to provide financial assistance to companies. One of these programs was the employee retention credit (ERC). The ERC gives eligible employers payroll tax credits for wages and health insurance paid to employees. However, when the Infrastructure Investment and Jobs Act was signed into law in November 2021, it put an end to the ERC program. Despite the end of the program, businesses still have the opportunity to claim ERC for up to three years retroactively. Here is an overview of how the program works and how to claim this credit for your business. Whether or not you qualify for the ERC depends on the time period you’re applying for. To be eligible for 2020, you need to have run a business or tax-exempt organization that was partially or fully shut down because of Covid-19. You also need to show that you experienced a significant decline in sales—less than 50% of comparable gross receipts compared to 2019. A ten-minute call can determine if your business qualifies, and how you can receive up to $26,000 per employee.
Did You Know?
Seven common mistakes to avoid when implementing new technology. The restaurant industry is in a revolution—or evolution—in its relationship to technology. Operators are looking for tools and systems to give them a competitive advantage, whether that’s by meeting customer wants or getting your labor numbers just right. However, as the number of tools available to restaurateurs expands, and the capabilities of technology also grow, it’s critical to be thoughtful about what software you select and how you implement it. Here are seven common mistakes you should avoid when looking at new restaurant technology.
Where are tip credit and minimum wage heading into 2023? At the end of 2021, Victoria Vish, an associate with national law firm Ogletree Deakins, wrote a blog entitled, “Tale of the Partisan Pendulum,” speaking to how much differing political parties have shaped labor policies in the past decade. Right now, the pendulum is swinging left, with Democratic President Joe Biden’s administration controlling matters. His leadership influenced the Department of Labor’s decision to resurrect the 80/20 rule, which went into effect in late December 2021. The mandate involves the tip credit, a standard that allows employers to pay tipped workers a lower minimum wage and let their gratuities cover the gap between the true minimum wage. For instance, a waiter being paid $2.13 per hour, but earning at least $5.12 in tips to reach $7.25 per hour. The $5.12 would be the tip credit.
Bielat Santore & Company – Restaurant Industry Alert
If you are looking to buy or sell a restaurant or other hospitality-type property, not any New Jersey Commercial Real Estate broker will do. Confidentiality is a precondition when considering such a sale. Therefore, the sale of a restaurant demands the engagement of professionals who are vastly experienced in the hospitality business and real estate marketplace. Such professionals can be found within the commercial real estate firm of Bielat Santore & Company, Allenhurst, New Jersey, serving the business and real estate interests of restauranteurs since 1978.
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