The COVID-19 pandemic affected all industries, but restaurants were among the ones that took the hardest hit. To minimize their losses, many restaurants pivoted to off-premises services or trimmed down their menus.
Now, two years later, restaurant operations are back to normal. But have they returned to their pre-pandemic state?
The National Restaurant Association says that restaurants and diners have found themselves in a “new normal.” That is, facing intense competition for workers and global supply chain issues.
After the mass layoffs in 2020, many former restaurant workers either switched industries or relocated to areas where there were still available restaurant jobs. On the other hand, the ongoing logistics disruptions caused by the pandemic continue to impact businesses, as major ports and airports in the US, China, and South Korea remain closed.
Furthermore, the tension between Russia and Ukraine interrupted the flow of goods and spiked fuel prices, making inventory even costlier for restaurants.
On the bright side, the National Restaurant Association predicts a dramatic bounceback this year; sales could reach $898 billion, up from $864 billion in 2019.
But will restaurants be back for good, or should we anticipate another uncertain season?
Restaurants Before COVID-19
Employment in the restaurant industry showed positive growth despite repeated labor shortages. Between 2010 and 2017, the number of jobs in the $45,000- $74,999 income range had a 71% increase. The restaurant industry employed 15.3 million people in 2019, up from 12.3 million in 2009.
Restaurant revenue totaled $864 billion in 2019. In-house traffic represented the majority of business in the table-service segment, but off-premises sales have also skyrocketed, thanks to online ordering apps. Off-premises customer traffic was the highest in quick service (70%), coffee & snack (70%), and fast casual restaurants (50%), according to the NPD Group’s Crest.
By early until mid-March 2020, comfort foods, especially pizza, were consumers’ top food choice. This was when COVID-19 was starting to spread, creating economic uncertainty. According to trendologist Mike Kostyo, it’s during times like this when people seek what’s familiar, and to many, that is comfort food.
Mukbang videos also steadily rose to fame on YouTube, allowing F&B businesses to capitalize on influencer marketing. Seafood and fried chicken restaurants significantly benefited from this trend, since their crunchy cuisine made mukbang videos more stimulating.
2020-2021: Pandemic and Transitional Period
The pandemic upended six years’ worth of restaurant growth. Sales were down to 2014 levels at $659 billion, $240 billion lower than the pre-pandemic projection of $899 billion.
Restaurants got creative with technology to stay in business. They mainly focused on online ordering, takeout, and delivery while in-house dining was temporarily restricted. Their efforts, however, bore fruit; the food delivery industry in the US has tripled in revenue, from $8.7 billion in 2015 to $26 billion in 2020.
The peak in online ordering has led to the rise of ghost kitchens or cloud kitchens, which are shared commercial kitchens for restaurants that only accept delivery orders. By mid-2020, the number of ghost kitchens in the US reached 1,500.
But while revenue from off-premises services soared, labor took a turn for the worse. The significant drop in sales and profit forced many restaurants to lay off a number of employees. Some restaurants went from having 100 staff members to only 20. Reducing full menus to a minimum viable menu also helped restaurants continue serving top-selling dishes without straining their skeleton workforce.
The National Restaurant Association projected a transitional period for 2021, expecting sales to reach $731.5 billion. By “transitional,” they meant that restaurants would embrace more off-premises technology. Sure enough, 64% of millennial diners said in 2021 that food delivery and takeout were “essential to the way they lived.”
Projections were surpassed as restaurants totaled $799 billion in sales in 2021, but it was still $65 billion lower than 2019’s pre-pandemic sales. The number of employees was also down from 15.3 million to 14.5 million.
2022: Are Restaurants Back for Good?
After 2021’s transitional year, restaurants have chosen to adapt to the new normal indefinitely. The National Restaurant Association has stated that restaurants will probably never recover from the pandemic, but early reports from F&B industry leaders are quickly dispelling that pessimism.
More than 13 million American diners were seated in restaurants via Yelp in Q1 2022, up by 48% from Q1 2021. Diners were faced with increased menu prices, though. Yelp found that menu prices went up 25% in Q1 2022. However, diners did not appear to mind this as they became increasingly concerned about the quality of restaurant food as opposed to its price.
Top restaurants have definitely regained their momentum. Multi-brand restaurant operator Darden Restaurants reported that their sales increased by 41.3% from last year. Brinker International, a multinational hospitality company, has also upped its sales by 15% in the third quarter of fiscal 2022.
Does this mean restaurants are back for good? It depends. The pandemic has urged the restaurant industry to enhance their off-premises services, so takeout and delivery became the new way to enjoy the restaurant experience. The decreasing cases of COVID-19 might’ve encouraged diners to visit restaurants again, but society has now gotten used to the convenience of online ordering. We wouldn’t just abandon this habit even with the option to dine in restaurants.
For that reason, embracing technology is the way forward for restaurants. It would be best to optimize both in-house and off-premises technology. Continuing partnerships with delivery companies is critical, especially for US restaurants, since the US is the second largest market for food delivery apps after China.
Self-ordering kiosks or QR code menus are great for streamlining the ordering process. With restaurant workers dwindling in number, letting diners order independently can help restaurants stay operational. Plus, QR code menus, in particular, allow contactless ordering and payment, which helps in avoiding COVID-19 and other communicable diseases.
The challenge that will likely linger in the industry is the rising costs of inventory. There’s no telling when the global supply chain will stabilize again. But if restaurants continue getting creative with technology—not to mention receive support from investors—they can adapt more quickly and help reinvent the restaurant experience.