Inflation Expected To Keep Pressure on Restaurant Industry in 2022, Trade Group Says

Eateries Ramp Up Drive-Thrus, Downsize Dining Rooms To Meet Demand for Off-Premises Orders

Photo Courtesy of Piman Khrutmuang.

U.S. restaurant industry sales are expected to rise 12.4% this year to $898 billion, even as the industry still navigates the pandemic by adapting to more off-premises ordering and copes with shortages of labor and supplies.


But that projected growth, according to the National Restaurant Association, will be largely hampered by rising inflation, which last month marked its biggest one-year increase since 1982. The Washington, D.C.-based trade group offered the forecast Tuesday when it released its 2022 “State of the Industry Report,” which provided insights into the food-service sector’s recovery and emerging trends, including those related to technology. Some adaptations have already changed the way restaurants use their real estate.


The trade group predicted a 12.4% sales increase in straight dollars, or 6.6% adjusted for inflation, from $799 billion last year. Sales in 2020, when the coronavirus outbreak struck, plummeted to $678 billion from $864 billion in 2019, the report said.


“While nominal sales are projected to surpass pre-pandemic levels this coming year, that’s not on an inflation-adjusted basis,” according to the report. “Real sales in ’22 are projected to remain below ’19 levels in all major segments.”


The restaurant industry was one of the hardest hit by the pandemic, especially early on when it forced eateries to temporarily close their dining rooms and for the survivors to pivot to fill orders for delivery or takeout. That situation improved in 2021 as pandemic-related restrictions were lifted in most states, but the repercussions are ongoing, with some chains now downsizing their restaurant footprints or opening more drive-thrus in response to the growing popularity of off-premises dining. But the trade group still warned that the industry may never return to its pre-pandemic levels.


“The restaurant and food-service industry has adapted and is carrying on with absolute resilience, so we’re optimistic about the path toward recovery in the coming year,” Marvin Irby, interim president and CEO of the National Restaurant Association, said in a statement. “We still have work to do to ensure that those operators struggling the most can survive. The association will continue to champion the necessary government support needed at the federal and local levels to help keep these businesses — cornerstones of our communities — on a path to better days.”

Rough Waters Still Ahead


But restaurateurs face many challenges this year, holdover problems from 2021. More than half of operators said it would be a year or more before business conditions return to normal, according to the report. Food, labor and occupancy costs are expected to remain elevated and continue to affect restaurant profit margins in 2022, the restaurant group said.


Technological advances are helping restaurant operators handle off-premises demand, with many planning to ramp up tech investments this year, the association said. A good amount of operators will devote resources to online or app ordering, reservations, mobile payment or delivery management, in addition to back-of-the-house technology, according to the report.


The report found that 54% of adults say purchasing takeout or delivery food is essential to the way they live, including 72% of millennials, those age 26 to 41, and 66% of Generation X adults, those 42 to 57. While fast-food purveyors were emphasizing drive-thru service and takeout even before the pandemic, now other restaurant categories are jumping onboard.


For example, gourmet burger chain Shake Shack debuted its first two drive-thrus late last year and plans to have at least 10 total this year. Company officials have also said they plan to pilot a site in Hasbrouck Heights, New Jersey, that will have limited or no indoor seating. Shake Shack has a location in Illinois with just a drive-up window to pick up food that has been ordered online, and it plans to debut more of them.


Fast-casual chain Chipotle Mexican Grill has been adding drive-up “Chipotlanes” to specifically handle online and app pickup orders. And Applebee’s, a full-service restaurant chain, is experimenting with drive-thru windows.


Others, such as Cracker Barrel Old Country Store, have opened so-called ghost kitchens.

“Ghost kitchens — making food for takeout and delivery only — remain a small presence on the restaurant landscape, but plenty of operators see their promise," according to the report. “Roughly 4-in-10 operators — including half of quick-service operators — think delivery from a virtual or ghost kitchen will become more common within their segment in ’22. Only about 1-in-6 think it will become less common.”


The report also found that 96% of restaurant operators experienced supply delays or shortages of key food or beverage items last year, and they expect issues will probably continue in 2022. About half of operators say recruiting and retaining employees will be their top challenge in 2022, according to the report. All in all, it remains an uphill battle in many respects.


“Restaurants and their patrons have found themselves in a ‘new normal,’” Hudson Riehle, senior vice president of research at the National Restaurant Association, said in a statement. “Given emergent technology, changing consumer behavior and dining preferences, and the extraordinary challenges of the last two years, the industry is unlikely to ever completely return to its pre-pandemic state. While recovery speed varies across the industry by segment, the constant innovation and sustained flexibility of restaurant operators are creating a new future for the restaurant industry. There will continue to be ample opportunities for growth in 2022 and beyond.”


Source: 2022 CoStar News.

13 views