HAPPY NEW YEAR -2024
PEACE, PATIENCE & PROSPERITY
Accelerated Sales and Traffic Growth Bring Optimism to Restaurants
November was an encouraging month for restaurants. For the second consecutive month, year-over-year (YOY) same-store sales and traffic growth accelerated, bringing much-needed optimism to the industry after September’s discouraging dip in performance. Furthermore, November’s traffic growth was the third strongest achieved by the industry since February of 2022. However, considering that the top two months (January and February of 2023) were outliers resulting from the easy Omicron laps from early 2022, it can be stated that November 2023 was the month with the actual strongest same-store traffic performance in almost two years for restaurants. Same-store traffic growth was -1.5% during November, representing an acceleration of 0.7 percentage points relative to October’s YOY traffic growth. Sales growth also improved for restaurants during November but at a slower pace than traffic. Same-store sales growth was 1.9% during the month, representing a 0.5 percentage-point improvement over October’s rate. November was the strongest month for restaurant sales growth since July’s growth of 2.8%. A factor that has continued to provide some relief to consumers and has allowed restaurant traffic to experience some recovery in recent months has been the sustained moderation in average check growth, which persisted in November.
The Biggest Restaurant Stories of 2023
This was the first “normal” year the restaurant industry had since 2019. We spent most of the year worried about the economy. And yet by December, the U.S. consumer continued to spend, even if they did so a bit less often to adjust to prices. Restaurant companies boasted about performance and upped their projections for new unit growth. Even so, the industry showed some cracks. Franchisees filed for bankruptcy. Consumers increasingly questioned the tip. Traffic is down, and consumers are wondering whether their visit was even worth it. We can see all this as we look at the biggest stories from the year that was. So, let’s take a look at the top stories of the year. The California Compromise. Hey, remember when we all thought $15 an hour was expensive? Good times. In any event, California fast-food operators will have to prepare for a $20 minimum, one that other industries and even independent and small chain and full-service restaurants will not have to pay. It all came about when labor and industry advocates came together, agreeing to a watered-down Fast Act and the end of an effort to declare franchisors joint employers of their franchisees’ workers. The law will create a council to oversee regulations in the fast-food industry and sets the stage for limited-service chains to pay $20 an hour come next April. It also calls for annual increases in that wage. The compromise has generated fear among operators in the state and is playing a role in McDonald’s franchise dispute. But large chains believe they’ll not only weather the increase but they’ll be able to grow.
Bielat Santore & Company – Restaurant Industry Alert
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Considering the sale of your restaurant (including land, building and liquor license)? Call Bielat Santore & Company first. We are currently working with multi-unit restaurant companies that are internally funded, have established banking relationships, are corporately managed and can move expeditiously toward closing on the right locations. We have sold several restaurants to these companies. This is the season to sell your restaurant. Buyers seek to contract properties NOW and close before summer 2024.
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New Jersey Restaurants Are Being Fined
For surprise credit card fees. Even though much of the U.S. is going cashless, credit card processing fees remain, and they can add up to be a devastating hit to struggling restaurants with low profit margins. Still, inflation-weary consumers are struggling too. As New Jersey Senator Gordon Johnson put it, “We understand these processing fees can be burdensome for businesses, but we also don’t want them taking advantage of the situation,” via NJ. Surprise credit card fees are enough trouble on their own. These charges are imposed by banking companies on merchants every time a credit card is swiped, and during a 10-year span, they have gotten more than twice as high. In 2023, 15% of restaurant owners nationwide added surcharges to their regular bills, per the National Restaurant Association (via CNBC). The rates often fall between 3% and 5%. Passing the cost to customers might seem like the natural move, and it’s legal. But the key factor here is that restaurants have to inform their customers about who’s fronting the swipe fee, and 16 New Jersey eateries are now facing hefty fines for failing to be transparent. The New Jersey Division of Consumer Affairs spent over a full year tailing these businesses to catch their pattern of unlawful practices and are now imposing penalty fees ranging from $500 up to $4,000. 12 restaurants were also sanctioned for refusing to accept cash payments. Informing customers about card-processing fees became a state law in New Jersey in August 2023. Restaurants are required to post “clear and conspicuous” notifications in customer waiting areas, at the point of entry, at the point of sale, and on the menus expressly informing consumers about the added swipe fee before they order their meal. That way, they can decide to hit an ATM or even dine elsewhere. Another (perhaps obvious) aspect of the law is that the swipe fee passed off on customers cannot be higher than what the restaurant would have paid if it had eaten the surcharge itself.
What We’re Putting Money On For 2024
Here are the predictions from the editors of Restaurant Business. It has been a year of keeping our collective fingers to the economic wind to see which way the consumer mindset is blowing. So much so, our fingers are getting chapped. Where will the winds blow in 2024? Here is the annual look into the crystal ball from the editors of Restaurant Business. From a potential IPO to sweet-sour flavors, here’s what may be ahead for the New Year. Jonathan Maze, editor-in-chief. Tepid sales ahead. A year ago, I gave out my predictions in haiku form. I was roughly half right. I said restaurant sales will increase but be tougher to come by (yes); labor costs will be better (they are) but third-party delivery won’t be as strong (only slightly correct) and there will not be an IPO (thanks a lot, Brett Schulman). Which means I was far more correct than economists were in predicting a recession, given that just about all of them thought we’d be in an economic downturn. But boasting about being better at prognosticating than economists really isn’t saying much. So, take any of these predictions with a giant grain of salt. Let me start with the easiest one: Restaurant sales will be tepid as the consumer adjusts to higher prices. Some brands will thrive while others will struggle. Bankruptcies will be more common as some of those struggling brands run against debt maturities. Now for a hard one: Subway will eventually get sold to Roark Capital. But only after Roark agrees to divest Inspire Brands, which it will do via IPO.
The Return of Opulent Dining
There has been a resurgence in the world of fine dining. During the COVID-19 pandemic, upscale restaurants faced unprecedented closures, leading to an abrupt shift in consumer behaviors due to lockdowns and the implementation of safety measures to curb the spread of the virus. However, many of these luxury establishments were able to pivot through the increased use of takeout and delivery services, with some even offering virtual tasting experiences and curated at-home dining kits. Although these innovations proved successful, they took away the magic of fine dining, as these establishments are not only for serving incredible meals but curating unforgettable experiences. When booking a reservation at an upscale restaurant, diners crave an escape, and with their meticulous attention to detail, inventive menus, elegant atmospheres and exceptional service they are all but guaranteed a memorable meal. Now with the pandemic in the rearview, fine dining is all the more appreciated due to its emphasis on this fact and has transformed into a symbol of celebration; a way for customers to enjoy life after a period of uncertainty. This heightened appreciation for the artistry of chefs, sourcing of premium ingredients, and the communal experience of dining is evident in the ever-increasing number of upscale restaurants in New York City that are embracing the changing times, while also using the classical techniques they are known for. The communal dining experience, with shared tasting menus and chef’s tables, has become a popular choice when seeking a luxurious meal. This trend encourages diners to engage with both the food and the people around them, fostering a sense of community and camaraderie.
2024 Emergency Planning for Restaurants
Taking proactive measures and having plans in place. Picture this – it’s 5 a.m. and you receive a frantic call about the state of your restaurant. In the hospitality industry, the last thing you want is a phone call from the alarm company at an early morning hour about a fire, break-in, or other disaster at your business. Taking proactive measures and having plans in place will allow your business to react quickly to help minimize the impact of an emergency. This in turn can save you time, money, and possibly even save lives. Ahead of 2024, we will share the all-too-common disasters that can strike restaurants from fires to civil unrest to water damage with pragmatic and proactive tips that can help curb the repercussions. Let us pass on the knowledge and expertise that we have gained in our 100+ years in the insurance business, so you can take a few things off your plate – and gain peace of mind. The best response is to prevent a fire before it starts by updating and cleaning your kitchen equipment, ensuring rags, and smoking materials are disposed of properly, investing in Class K extinguishers and finally 86ing flaming shots. The Best Offense is a Defensive Kitchen: Cooking equipment is probably the most important thing inside a restaurant – and it’s also a leading cause of fires. Restaurant and bar owners can mitigate these risks by hiring qualified professionals for installation, maintenance, and cleaning service. Additionally, they can train employees on proper cleaning, frequency intervals and safety procedures.
How to Be Less Stressed Going Into 2024
It’s all about preparation. 2024 is quickly approaching, and you will most likely be making a New Year’s resolution or two. And, if you are like the majority of those who make these resolutions and start the year with nothing but good intentions, you will probably break your resolutions just days into 2024. However, unlike the idyllic resolutions you may make in your personal life (we know our yearly “eat healthier” resolution falls to the wayside as soon as we are confronted with a Biscuit Belly “gravy train” … we are weak!), below are some good resolutions for you to make and keep for your quick-service restaurant as you look ahead to the New Year: “Tame the Bulge.” If you have not already done so, in 2024, you should take a look at revising and updating your employee handbook to make sure it does not offend the National Labor Relations Board (“NLRB” or “the Board”). By way of background, the NLRB recently changed the law again on employee handbooks by modifying the legal standards that for the past six years have provided a commonsense solution for evaluating workplace misconduct rules. Under the new standard, the Board analyzes whether an employee “would reasonably construe” a rule or policy as chilling protected conduct under Section 7 of the National Labor Relations Act. To avoid a violation, employers must show that workplace conduct rules are narrowly tailored to special circumstances justifying any infringement on employee rights.
Did You Know?
Setting the bar higher: prioritizing the customer experience in 2024. With the new year fast approaching, foodservice and restaurant operators continue to grapple with strategies to overcome the challenges they face in today’s economic climate. The question is how to create priorities and an agenda that maximizes the guest and customer experience profitably. We see four key concerns and would like to dedicate this space to suggesting solutions and strategies for dealing with each. Labor issues are still a top concern. From attracting, training, and retaining talent to addressing increasing employee costs, some restaurants are scaling back their hours of operation as a result.
Employee Tip
How to become the best manager for your restaurant. It doesn’t matter if you have been in the restaurant industry for a decade or are just starting out, running a successful restaurant can be a stressful task. Management takes on multiple jobs throughout the restaurant including hiring, marketing, maintaining the budget, operations and keeping customers and staff happy. When working in a restaurant, management must utilize a variety of skills to run a successful business. Throughout my decades of working with restaurant and small business owners, these are four areas I always speak with clients about so they can be successful in their roles.