Is delta derailing the restaurant recovery?

Just when the restaurant industry was getting back on its feet, along came the delta variant of COVID-19, increasing new infections and threatening the speed of the entire economy’s recovery.

For restaurants, delta has not derailed the recovery so far, but it has delayed it.

“The consumer obviously, with the delta variant, has become more cautious again,” said B. Hudson Riehle, senior vice president of research at the National Restaurant Association in D.C.

Because of the variant and how consumers are reacting to it, the restaurant industry is not expected to recover before mid-2022, Riehle said.

The variant is one of three big problems restaurants are facing on the road to recovery.

Another one is rapidly rising food costs. Restaurant owners are absorbing some of that, but so are customers.

“Wholesale food price inflation is at its highest rate since 2014,” he said,

The rising costs for food and beverages are being passed on to consumers.

“So consequently, menu price inflation is moving up,” Riehle said.

Average year-over-year restaurant menu price inflation is the highest since 2008, according to the restaurant association.

In addition to food costs, labor costs are higher, and restaurants are finding labor shortages equally as challenging.

July did mark the seventh consecutive month of staffing growth in the restaurant industry, translating to a net increase of 1.3 million jobs in the first half of 2021. But eating and drinking places remain nearly 1 million jobs below pre-pandemic levels, and 75% of restaurant operators report recruiting employees was their top challenge as of June 2021, the highest level ever recorded, according to the National Restaurant Association.

The Labor Department’s August jobs report showed no job gains in the leisure and hospitality industry.

The National Restaurant Association’s midyear forecast for the 2021 State of the Restaurant Industry Report forecasts food and beverage sales will total $789 billion this year, up 19.7% from 2020.

It also expects changes in restaurant service. Street dining, digital ordering and more off-premises dining are now ingrained in the restaurant industry.

Get a copy of the National Restaurant Association’s 2021 State of the Restaurant Industry Mid-Year update online.

Jeff Clabaugh

Jeff Clabaugh has spent 20 years covering the Washington region's economy and financial markets for WTOP as part of a partnership with the Washington Business Journal, and officially joined the WTOP newsroom staff in January 2016.

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