We’re hearing it again and again: What is going on in the foodservice industry!?
As social restrictions ease across the country and public trepidation concerning gatherings and outings continues to dissolve, positivity is mounting that we are now finally heading toward a post-pandemic “new normal.” It means a return for many to the things they enjoy, including experiences like eating out with their friends and family at their favourite restaurants.
And, although this yearning for experiences presents foodservice establishments with significant opportunities, it’s also coming at a challenging time. Supply chain shortages and delays, rising food prices, labor market challenges, and other restaurant trends are combining in what industry expert George Minakakis calls a perfect storm, threatening restaurateurs’ ability to seize upon the growth opportunities needed during this crucial time of rebuilding.
“The challenges faced by restaurant operators and their staff are far more unpredictable and varied today than they ever have been before,” he says. “Their operations are being impacted from all sides, resulting in an extremely difficult time that’s really testing their resolve and plans to grow.”
Here’s what you need to know about the challenges and restaurant trends impacting the success and growth of the foodservice industry:
Supply chain shortages and delays
One of the most pressing issues currently impacting the operations of restaurateurs is the supply chain shortages and delays. In fact, according to a recent National Restaurant Association survey, 96% of restaurants in the U.S. have experienced “considerable supply delays or shortages in recent months.” This has resulted in an inordinate amount of disruption and uncertainty, says Minakakis, unsettling the entire chain of supply for many foodservice organizations.
“Disruptions, including delays, shortages and other obstructions have been severely inhibiting the efficient and effective operations of those operating within the foodservice industry for quite some time now,” he asserts. “And these disruptions can be seen everywhere from the absence or unavailability of certain products or ingredients from suppliers and manufacturers to the sourcing of local goods. It’s placing a great deal of pressure on restaurateurs, forcing them to reassess their supply chain strategies and make changes where possible.”
Rising food and menu prices
Another massive issue impacting those operating within the foodservice industry is the rate of current global inflation. According to numbers generated by the Consumer Price Index, global inflation more than doubled between March 2021 and March 2022, accelerating to a whopping 9.2%, up from 7.5% in February. This kind of economic turmoil wreaks havoc on foodservice operators, says Minakakis, and there are layers to its impact.
“When restaurateurs are faced with inflation of this magnitude, resulting in increases to the cost of just about everything, it’s an obvious and unfortunate consequence that menu prices are going to increase, too,” he says.
“It erodes the operator’s confidence in turning a profit. And, in turn, the fact that they inevitably have to raise prices for items on their menu to offset these increased costs then has an impact on the consumer and their willingness to pay the increases. It’s resulting in a lot of downsizing and sharing among patrons as they manage how much they spend.”
Increased focus on controlling costs and driving revenue
As restrictive as the rising price of food and ingredients might be for foodservice operators, Minakakis suggests that it’s all part of doing business for them. Generally speaking, he says, they are an incredibly savvy group of people who are used to responding to shifts in the market and changes in consumer preferences. And, in order to control their costs and continue driving revenue, he adds that many are being forced to leverage their savvy more than ever before.
“The rising cost of food and ingredients have made it very difficult for many within the foodservice industry to manage their costs effectively,” he says.
“As a result, many are finding it necessary to make some changes and shifts with respect to some of their menu items. They are changing ingredients where they can without compromising quality and are reducing portion sizes. However, there continues to be deserved focus paid toward automation as a means to increase production within a labor-intensive industry, helping restaurants reduce costs.”
Labor market challenges
For an industry so heavily reliant on its people, the current labor market crisis has signified a crushing blow to the ability of foodservice operators to execute on their guest experience. It’s a challenge that Minakakis recognizes. However, he believes that it’s a shortage of talent that may soon ease, driven largely by a rethink of the experience that employees receive within the foodservice industry.
“The pandemic really tainted the waters with respect to working within the foodservice industry. It suddenly didn’t seem to be a very attractive place to work, dealing with health and safety issues and disgruntled and angry customers. In addition, working within an industry that’s predicated on revenue and threatened by closures and shutdowns really led to a feeling of instability,” he says.
“However, I believe that’s about to change. And, to entice people back to the industry, restaurateurs are going to take a good look at the culture of their establishments and organizations to make sure that it’s a place of opportunity where employees feel good about themselves, the work they’re doing and who they’re doing that work for.”
Constrained growth opportunities
One of the many grave consequences of the pandemic has been highlighted by the rash of closures that have occurred throughout the industry. It’s a consequence that’s helped create a void within the market. And, according to Minakakis, it’s a void that should present a wealth of franchising opportunities over the course of the near-term, despite the many challenges that the industry is currently facing.
“Right now, most across the industry are relatively nervous about expansion,” he acknowledges. “And rightly so. However, the next year or so is going to present huge opportunities for people who want to purchase a franchise location and for the chains that want to grow. And, for the smaller players, it’s going to be very much steady-as-you-go as we continue to figure out exactly what the future has in store for the industry.”
Looking at the current state of the foodservice industry, there isn’t a shortage of challenges to overcome. Though, according to Minakakis, along with the challenges there are also opportunities for foodservice operators to capture the customer with an offering, service and experience that is second-to-none, initiating long-term, positive impact for their business.
“Understanding the forcing functions impacting the foodservice industry may allow restaurateurs to pivot and shift their service and offering in order to not only survive the coming months and years, but to flourish,” he says.