Our restaurant consultants believe in solutions-based approaches to hospitality and business, and we believe, with this attitude and attention to growth, restaurant businesses can survive upward and downward trends within the industry. However, the stretch since the business restrictions of the Covid-19 shut down has been long and tumultuous, impacting business operations and consumer confidence. Now, with inflation and rising gas prices, it seems another layer has been added to the end of an already long economic downturn.
While restaurant owners must keep a positive outlook and work to buoy the morale within their company, from a business perspective, as well with guests, it is crucial to keep a realistic understanding of where things stand. Realism and positivity must work hand-in-hand for a business model that is effective for everyone, from the customer to the CEO. “This year is shaping up to be marginally better than last year for the restaurant industry, but not by much as both operators and their customers are coping with rising costs and muted confidence,” writes Bret Thorn, a senior editor at Nation’s Restaurant News (NRN).
It is the honest approach to what is positive and challenging in the current industry, and “the assessment of Robert Byrne, senior director for consumer research at Technomic, who provided a mid-year update on the state of the industry for attendees of CREATE: The Event for Emerging Restaurateurs at the Terranea Resort in Los Angeles.” Thorn’s article and Byrne’s presentation give a dual perspective on what’s happening in the industry.
For example, for the last several years, industry professionals have been putting emphasis and resources into AI and other technological upgrades. This has shown marked improvements in restaurant efficiency and customer experience—and, there’s a chance it might not be a long-term solution. As Byrne put it, “younger consumers [are pushing] back against AI and other obstacles to human connection.”
Another concern that restauranteurs should address with caution: traffic. Byrne says this could mean literal traffic—the emphasis on rising gas prices as an obstacle to potential restaurant customers—to how inflation is impacting prices on everything and creating a cycle of reaction. Customers have “pushed back against rising menu prices, a necessity for operators as their own costs rise,” he says.
Of course, gas prices and inflation aren’t the only financial concerns. Employment continues to be an issue, especially into the Gen Z category. “Additionally, GenZ consumers — those born around 1995 or later, are cash-strapped, with higher unemployment rates than Millennials had at the same age while the cost of living continues to rise,” Thorn writes, adding that this has as much to do with an up-and-coming generation as the older ones remaining active longer. “Older consumers continue to control most of the nation’s wealth, with 51.4% in the hands of Baby Boomers and another 26% controlled by Generation X.” Not surprisingly, these factors are impacting the future already, with population growth continuing to slow to an anticipated standstill within the next five years.
Restaurant owners can’t take on entire generations and the country’s economy, and so when facing issues like inflation and slower traffic, it can be difficult to make smart decisions. The best advice is to avoid snap judgments and to consider the longer-term vision. Restaurants are still a part of hospitality, and that consideration of care is always what matters most. “Byrne said that food & beverage quality remains the most important factor when consumers decide where to eat out, followed by cost, except for households with annual incomes of $35,000 or under, for whom cost is the deciding issue.”
Richard Weil, owner and principal of National Restaurant Consultants provides additional input: “A key component of this mid-year report is the word hospitality industry. While key factors for consumers making dining-out decisions are being tolled by external economic factors of rising gas prices, and other inflationary factors, consumers will still return to restaurants that provide a positive experience. Now, perhaps more than ever, operators need to stay keenly aware of the guest experience. Paying attention from the parking lot in and placing a smile of hospitality will go a long way to attract and retain customers.”