As wider economic pressures ease and the restaurant industry shifts into growth mode, a focus on innovation and efficiency will help ensure sustainable success.
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.
What is the Average Profit Margin for a Restaurant?
While the AI boom is expected to hit the restaurant industry in 2024, many operators have already implemented AI into their tech stack – and may not even be aware of it. AI can take different forms in a restaurant, including everything from voice AI for over-the-phone ordering, to using AI for menu engineering, to even leveraging it to improve the customer experience.
In addition, AI can be used to automate and improve many back-of-house processes such as sales forecasting, purchasing, inventory, scheduling, and accounting. Automation is key in saving operators time and money by improving efficiency and streamlining repetitive tasks.
Food delivery has become a consumer expectation, but not every restaurant has the infrastructure to make their own deliveries. 50 percent of survey respondents said that third-party delivery is a net positive because it increases restaurant sales. However, 34% felt that the high commission fees cut into their profit margin.
The best-case scenario is for restaurants and delivery services to find a balance where both businesses can turn a profit without passing on the costs to the consumer through higher menu prices or smaller portions, which can negatively impact customer loyalty. Looking forward to 2024, operators should prioritize owning their data to stay in communication with loyal customers and offer promotions for repeat business. Communicating directly builds relationships that will not be gained through a third party.
There is no way to predict whether we will see an economic downturn. Should we experience one, the impact would be lesser than experienced during the COVID-19 pandemic when sales were down $240 Billion from projected levels and over 110,000 locations shut their doors. Proactively preparing your restaurant will pay dividends in the near and long term by providing a cushion against any unforeseen challenges.
A potential economic downturn might not seem like the ideal time for new investments, but technology can significantly enhance restaurant operations, making it a cost-effective way to improve operational efficiency and customer experiences. From lessons learned over the past few years, restaurants that revamped their tech stack and strategies were more resilient to challenges. During the pandemic, operators who found ways to make more money out of the same restaurant square footage were able to not only survive but thrive. Operators should embrace the power of technology and invest in the tools needed to make informed decisions on inventory, staffing, and profitability quickly.
If the last few years have proven anything, it’s that restaurant owners and operators must be ready for anything. The measures leaders take in the coming days, weeks, and months to strengthen business operations will equip them to handle any economic fluctuations.
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