It's no secret that restaurants were among the hardest-hit businesses during the pandemic. Early in the crisis, food establishments were forced to shutter to in-person diners. Then, once allowed to reopen, they faced ongoing restrictions that were lifted, eventually, but at a time when supplies became harder to procure, and workers became harder to hire.
At this point, many restaurants are struggling due to higher food and labor costs and continuing supply chain hiccups. And despite many consumers being eager to return to restaurants after staying away for much of the pandemic, the outlook for restaurants is still overwhelmingly bleak.
A hard pill to swallow
The National Restaurant Association recently issued a dire warning to the industry: It will never return to its pre-pandemic state. The trade group insists that 2022 will be a new normal for the sector, and whether that's good or bad is yet to be determined.
Reading between the lines, it's clear that restaurants may have to operate differently in perpetuity due to changing customer patterns and behaviors. For one thing, the days of cramming diners together table to table may be gone. Restaurants may now always have to limit capacity to some degree to cater to customers' crowd-tolerance levels. And fewer diners means less revenue.
Now, one positive piece of news is that the National Restaurant Association anticipates restaurant sales rising in 2022 to $898 billion, up from $864 billion in 2019. At the same time, though, only 25% of restaurant operators think their businesses will be more profitable this year than in 2021.
Hiring challenges could also drive a lot of restaurants into the ground. A full return to employment is not expected for the industry this year. And given that quit rates for the industry sat at 10.2% in December, it's fair to assume that restaurants will have a hard time meeting their staffing needs even if they introduce higher wages into the mix.
Then there are rising costs to grapple with. Inflation is hammering small businesses all over the country, and restaurants are no exception. A good 90% of restaurant operators think costs will continue to rise throughout 2022, and 96% don't think supply chain issues will be fully resolved this year.
A potentially harsh blow for real estate investors
A thriving restaurant scene can be good for communities and local property values -- both commercial and residential. On the flip side, restaurant closures can cause property values to plummet.
As such, real estate investors stand to get hurt if the restaurant industry as a whole doesn't recover from the pandemic's impact. Commercial landlords with restaurant tenants might especially feel the pain since closures could result in vacancies and lost revenue.
Of course, restaurants have a few key things going for them right now. The economy is strong, unemployment levels are down, and pent-up consumer demand is likely to manifest in the aftermath of the omicron surge. But whether that's enough to keep restaurants in business is yet to be determined.