Restaurant Trends Every CFO Should Get Ahead of in 2023
Hospitality leaders have been put through the wringer the past few years, especially when it comes to restaurant finances. However, all of those trials and tribulations led to one collective takeaway for everyone in the restaurant industry:
It’s not just about increasing profits, it’s about prioritizing people.
What we’ve discovered in the data (whether or not you’ve experienced the same level of economic hardship as your peers): without good people, profitability is unsustainable. It’s just as important to concern yourself with the quality of people you invite into your workplace as the quality you place on customer experience and loyalty.
Data has become a valuable and necessary resource in which to invest. Not only is tracking finances important to ensure your restaurant generates positive revenue, but it’s also vital to the overall health of your business. And for the most part, restaurant operators are already capturing a lot of data through different channels, they just don’t necessarily know how to use it. With a more contextualized understanding of your restaurant revenue, it’s easier to set attainable benchmark goals for the year to come.
Restaurant Finance Categories to Monitor
- Restaurant sales,
- Restaurant traffic,
- PPA (per person average),
- Sales per labor hour,
- Beverage versus food sales, and
- On and off-premise sales
So which categories are the most important?
Based on the industry performance of 2022, we’re sharing the current state of restaurant finances as well as the top trends to get ahead of in 2023.
A Look at Today’s Restaurant Sales and Traffic
In our monthly Out of the Box Insights, we recently reported the rebound of restaurant sales and traffic growth in August 2022, posting the best month since March.
This was, thanks in large part, to an increase in consumer confidence. The Consumer Confidence Index reported an uptick in August, following three consecutive monthly declines.
A drop in gas prices combined with a more positive short-term outlook for income, business, and the labor market were all contributing factors. When gas prices rise, people typically stay in to save money. The improvement in confidence may also support overall spending habits soon. However, confidence will be offset by additional rate hikes and inflation (even with easing).
Internally, restaurants have been bearing the brunt of inflation in big ways. The cost of food, raw materials, labor, and everything in between spike while already thin profit margins become even more pinched. The most immediate response has been largely unanimous among restaurants: raise prices. The result? Industry-wide price increases have driven up average check size.
Because of the great economic impact and timing of events throughout 2022, guest expectations and overall satisfaction have wavered greatly. Restaurant guests are now increasingly aware of and sensitive to value. Guests are grappling with what they get in terms of food and experience compared to what they pay. In other words, maybe it’s worth it, maybe it’s not.
In our latest State of Restaurant Sales and Traffic report, we defined exactly what the impact of today’s average check size has on sales, supply, and guest satisfaction. For example, evolving consumer preferences have been keeping ‘intent to return’ scores below average for much of the industry. There’s much to be said about where your guests place the most value in their experience. Now, the data is showing that we’re more price-conscious than ever.
Off-Premises Dining Will Still be High in Demand
Black Box Guest Intelligence data shows customers opt for off-premise options including take-out and delivery more now than they did before the pandemic. While the shift to off-prem dining began in reaction to the COVID-19 lockdown, it’s now established and remains a (semi) reliable option for consumers. It’s a revenue center that certainly keeps labor costs down, but requires brands to deliver minimal friction in the customer experience when guests move through the ordering and delivery/pick-up process.
In order to do this well, restaurants need time and a small test market to experiment new processes or technology with. Unfortunately, the one element we can’t control: time. Tapping into solutions that will pick up the slack for you or automate some of your mundane, administrative tasks will ensure you get the same results, but faster.
Restaurant Staffing Shortages Will Turn a Corner
Recent data from Black Box Workforce Intelligence showed restaurants are still operating at lower staffing levels than they were in 2019 before the pandemic. According to BBI’s 2022 Total Rewards Survey, only 5% of restaurant companies declared being fully staffed for restaurant hourly front-of-house employees during the first 6 months of 2022. The largest group fell into the ‘somewhat understaffed’ category, which included 73% of total respondents, while a significant 23% stated they were constantly “very understaffed” for these positions during the same period.
The good news, though, is that turnover rates have started to ease. This was a welcome relief after record-high management and non-management turnover for both Limited-and Full-Service restaurants – levels that accelerated rapidly in the second half and 2021 and peaked in Q1 of 2022. Our analysts predict that based on the latest data, restaurant staffing shortages will truly turn a quarter with each segment.
Seasoned Managers Will Become Less Common, Harder to Retain without Fair Compensation
Management turnover will remain an ongoing issue. In 2022, while non-management turnover decreased slightly, management turnover didn’t. Management turnover remained at peak levels for the Full-Service segment. If there was any tailwind for management turnover, it’s that rates appear to have climaxed and are holding at current rates compared to the rapid acceleration experienced last year.
Although BBI Analysts anticipate a slow decrease in turnover rates in the coming months and quarters, they’re unlikely to return to pre-pandemic levels in the near future. As BBI’s guest intelligence data uncovers more of what consumers want these days, it’s going to be hard to meet those expectations with consistent employee and management turnover.
Black Box’s Financial and Workforce Intelligence Gap-to-Segment scores measure how a brand performs against its segment median. By combining the results from the 2022 Total Rewards Survey with Black Box data, we revealed a strong relationship between General Manager base pay and bonuses and restaurant performance.
It turns out that companies with the highest pay increases beat their segment by 10 percentage points more in same-store sales growth and 9 points more in same-store traffic than the lowest paying brands in 2021 Q4.
The labor market will remain tight in 2023 as restaurants compete with other industries for labor and contend with workforce participation rates that aren’t expected to return to pre-COVID levels. As a result, restaurants may need to set lower financial benchmarks while finding ways to offer a fair, competitive wage to restaurant managers in order to maintain a competitive position in the market in 2023.