MERRY CHRISTMAS, HAPPY HOLIDAYS
AND A PEACE-FILLED NEW YEAR
Restaurants Brace for the Most ‘Normal’ Year Since 2019
The landscape ahead looks ripe. It appears the time to retire the phrase “new normal” has arrived at last. This far removed from COVID’s 2020 onset, the “new normal,” is, for all definitions, just the “present.” But to a larger scope, 2024 has the makings of the most “normal” year since the crisis, BTIG analyst Peter Saleh shared in a recent note. Unpacking what that means, however, isn’t as simple as celebrating the sunset of one of the worst and most tangled stretches in sector history. With sales, unit development, and commodity and labor inflation, BTIG analyst Peter Saleh believes 2024 will more closely resemble 2019 than any of the years in between. Yet in turn, “some less desirable elements” are going to resurface. It feels bankable that heightened promotions and value offerings will dominate the landscape as operators work to restore customer traffic. For a snapshot, quick-service restaurant U.S. traffic was down 1.8 percent in November, year-over-year, according to Revenue Management Solutions. November 2022 was off 5.3 percent from 2021. RMS estimated industry traffic today stands 18.4 percent lower than pre-virus life. Dinner was the lone daypart up (0.8 percent) in November, while breakfast (negative 3.2 percent) and lunch (negative 3.4 percent) slid. Delivery traffic was 12.4 percent higher versus this time last year. But it has been declining since September.
What Does 2024 Look Like
For the restaurant industry? A new year brings new beginnings and opportunities for transformation in the restaurant industry. It’s the perfect time to look back on a few things we learned in 2023 – based on recent survey data from our restaurant partners – as well as what we predict for the industry in 2024. To gauge the state of the restaurant industry, including the industry’s most pertinent worries around food and labor costs, Restaurant365 conducted a survey of over 730 customers representing 14,000+ locations in December 2022 and again in September 2023. According to the 2022 data, 74 percent of customers surveyed expected to see a rise in food costs, and in September 2023, the average increase in food costs reported was 2.9 percent. Fifty-three percent of those respondents said they have reduced their cost of goods sold (COGS) through better inventory tracking of key ingredients. The survey also showed 75 percent of respondents expected their labor costs to increase in 2023. By July, 83 percent had seen a rise in labor costs. Six out of 10 customers used sales and labor data to make actionable improvements. Ultimately, after a tumultuous few years, 2023 was better than many operators predicted. The restaurant industry is cautiously optimistic as we head into the new year. According to the survey data, 45 percent of operators reported a surge in same-day sales between August 2022 and August 2023. On average, these restaurants experienced a five-percent increase in sales during this same time period, signaling a positive trend in consumer spending at restaurants and overall industry resilience.
Bielat Santore & Company – Restaurant Industry Alert
BRINGING THE YEAR TO A CLOSING!
MIDDLETOWN: When the owner and operator of a neighborhood tavern died in 2020, he left a 70-year legacy of good food, good drink and good times behind. At the age of 88, Carl Bachstadt passed away with no successor or succession plan in place to keep his namesake, Bachstadt’s Tavern, 8 Bray Avenue, Middletown, Monmouth County, New Jersey open to the public. The 5,100 square foot tavern had been closed since Bachstadt’s death. In 2023, Bielat Santore & Company, Allenhurst, Monmouth County, New Jersey was awarded an exclusive listing by the Administrator for the Estate of Carl Bachstadt to sell the real estate and liquor license. The firm found a buyer as they always do.
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Buying and Selling
Interest rates remain a challenge. The restaurant industry has been put through a meat grinder the last three years with pandemic lockdowns in 2020 and inflation and labor issues dominating most of 2021 and 2022. This year was the first year that restaurant owners had a chance to breathe and get their business back to baseline after spending the last two years recovering from pandemic losses. The recovery in the restaurant industry means that restaurant owners looking to sell their business in 2020, but couldn’t due to the pandemic economy plummeting restaurant values can finally sell in 2023. However, high-interest rates are pushing some prospective buyers out of the market who can’t pay with cash. The restaurant industry is back to normal. Your average restaurant owner is going to have two solid years of tax returns showing steady growth and increased revenues which they can show to buyers as proof that their restaurant increased in value. If you are looking to sell your restaurant right now there is going to be interest, especially if the restaurant is a turnkey business. Quality restaurants are selling in this market and restaurant owners dealing with burnout from rebuilding their business are looking to get out of the industry and sell. High interest rates were a problem in 2023 and the cost of borrowing money did keep people out of the market.
Elevating Diners’ Experience and Restaurant Revenues
During the Holidays. One of the most exciting parts of watching Olympic swimmers race is seeing the “underdogs” come from behind and win. Knowing they have one last chance, these athletes harness every bit of their strength, move steadily to the front of the pack, and finish first in a dramatic moment. The holidays are restaurants’ version of the Olympics; these final weeks are their last chance to surge forward. QSRs, coffee shops, fast-casual restaurants, and full-service establishments all have one more opportunity to win over new diners and achieve record revenues. The rewards could be sweet; Mastercard’s Spending Pulse report projects that 2023 holiday spending at restaurants will be 5.4 percent more than in 2022. Who will capture the gold? Those who provide a superlative experience to their diners? Achieving that pinnacle is anything but easy, especially if staff can’t keep up with the crush of holiday customers. That is why multi-unit restaurants are leveraging a multitude of technologies to make every dining, delivery, drive-through, or takeout experience festive and memorable. For example, when a restaurant scales from 150 to 400 customers a day during the holiday period, technologies to improve order routing and drive-through queue management can enable teams stretched thin to serve customers efficiently. The Internet of Things (IoT) is a powerful example of a back-end innovation that improves diners’ holiday experiences. Once restaurants connect their equipment—ovens, refrigerators, freezers, dish machines, fryers, HVAC, lights, and even their sound systems—they can control, monitor, and automate what’s happening at every location based on the data their connected equipment shares through the cloud. This lets restaurant operators preempt risks, tune up operations, offer a better dining environment, and make every experience a 10 out of 10.
Why Holiday Catering Matters to Growth-Minded Restaurants
For restaurants looking to spur expansion, it’s a huge opportunity. Catering is becoming increasingly important to restaurants in today’s climate. According to Toast’s 2023 Voice of the Restaurant Industry Survey of 847 restaurant decision-makers, 48 percent of restaurant operators say it’s a top priority for the next 12 months, putting it on par with on-premises dining and delivery. With the holiday season quickly approaching and many workers back in the office, this time of year is ripe to be one of the restaurant industry’s biggest catering opportunities. This busy season for office parties and private celebrations can unlock new opportunities to feed more mouths and grow a restaurant’s customer base and profits. Given this large opportunity, growth-minded independent restaurant operators and regional chain managers should consider harnessing catering’s momentum this holiday season. Let’s look at four reasons why. Catering diversifies holiday revenue streams beyond on-premises office parties. This diversification not only means boosting operators’ sales but also making up for typically slowed on-premises dining during Christmas Day and New Year’s Day (as well as other times of the year due to inclement weather such as blizzards, heavy rain, or hurricanes).The overall catering revenue potential is lucrative. The size of the catering market is expected to reach $72.67 billion by the end of 2023 and is expected to increase at a compound annual growth rate of 6.2 percent, amounting to $124.36 billion by 2032. Earlier this year, global business consultancy McKinsey called catering a key avenue for growth-minded restaurants. Major brands, such as Chipotle, Sweetgreen, Panera and even full-scale restaurants like Another Broken Egg Cafe, are listening and leaning into catering to diversify revenues.
Restaurant Operators Should Rethink Their Approach to Liability and Insurance
46% of operators surveyed said that they do not have workers’ compensation insurance. While many restaurant operators are primarily focused on everyday operations and budgets, they should be paying more attention to legal liabilities, according to the results of a survey of 250 independent operators released by risk management company, Aon and its subsidiary, small business insurance platform, CoverWallet. According to the data, more than half (56%) of restaurant operators do not fully understand the risks and liabilities of running their business, which include safety hazards, cyber attacks, and several types of liabilities that could occur from serving liquor. “Restaurant owners are moving at the speed of light and with the economy and everything going on right now, margins are king,” Randy Storm, director of sales and account management for CoverWallet told Nation’s Restaurant News. “They may have a preconceived notion that the cost of some of these coverages and protection is greater than what it might actually be… and they don’t have any reference point to understand that if something does go south, how much more it will cost to cover that unfortunate situation just because you don’t have coverage.” Two of the most important types of insurance coverage for a restaurant are workers’ compensation insurance and cyber liability insurance—to cover employee injuries and illnesses on the job, as well as losses that might incur through data breaches and hacking. Even though workers’ compensation is one of the most common types of business insurance, 115 out of the 250 operators surveyed did not have it. This datapoint is particularly surprising because workers’ compensation insurance is a requirement (at least in part) in every single state except Texas.
Did You Know?
The ABCs of restaurant management. Managing a restaurant isn’t just about making sure the lights are on, the guests are served and the money makes it to the bank. Restaurant management is one part art, two-parts systems and training. Let’s break down the ABCs of restaurant management. Let’s look at some essential systems you should have in place and how they can transform your restaurant.
Employee Tip
Are restaurant employees today entitled? The new era of restaurant employees expect more from their employer. They want to work less hours, get paid more, be given respect, want to work from home, want full health insurance, 401K, and four weeks of vacation a year. They want their employer to invest in their training and development. They want to feel like they are part of something bigger than themselves. But are they delivering performance and success equal to what they expect?
