Food and labor are two leading cost drivers that impact a restaurant's bottom line.
Restaurants are bullish regarding growth in 2023 even as they expect continued increases in food and labor costs.
Nearly 60% of respondents said they have growth planned in 2023, according to a study by restaurant enterprise management software company Restaurant365. The “R365 State of the Industry Customer Survey” results represent more than 10,000 quick-serve, fast casual, casual dining, and fine dining participating locations across the United States.
Looking ahead to the new year, 75% of survey respondents expect labor costs to increase in 2023 and are planning to focus on recruiting and retention efforts. And 38% plan to use additional spend and resources on salary increases and recruitment to combat this ongoing issue.
The study noted that 2022 brought an increase in sales across the industry with the return of on-premise dining. At the same time, many operators struggled with profitability due to the continued labor shortages and increasing food costs. (Food and labor are two leading cost drivers that impact a restaurant's bottom line.)
Most respondents noted increases in both, with labor costs increasing 9% and food costs increasing 10%, on average. Amid increasing inflation, many operators found it necessary to increase menu prices to balance margins and the customer experience.
The majority (92%) of surveyed restaurants increased their menu prices in 2022, with the average increase being 8%. Seventy-three percent plan on increasing menu prices in 2023.
"Operators are finding strategic ways to drive profitability," stated Tony Smith, CEO and co-founder of Restaurant365. "Restaurants who are already making data driven decisions to lower labor costs, control inventory, and reduce waste can also turn to menu engineering to improve their margins.”
Smith added that while many are predicting an economic downturn in 2023 and many business sectors are bracing for uncertainty, the restaurant industry has already learned how to be more efficient with their business operations over the past couple of years.
“They are well prepared to operate no matter what economic challenges may lie ahead and can focus their efforts on other pressing issues such as recruiting and retention,” he said.
Restaurant365 is an all-in-one, cloud-based accounting, inventory, scheduling, payroll, and HR solution developed specifically for restaurants. The company is backed by Bessemer Venture Partners, ICONIQ, Tiger Global Management and Serent Capital.