The following is a guest post by Dan Simons.
As the New Year begins, so does the business of planning for the upcoming year for most restaurants in the nation.
According to the National Restaurant Association, 2012 saw a slow but steady growth for the reportedly fourth consecutive year in industry sales for the roughly 980,000 restaurants in the U.S. However, not all is expected to come easily to the restaurant industry this year.
There are several factors poised to affect restaurant businesses in 2013. Below are the top five that you should review to determine a potential impact on your business.
Midwest Drought
The Midwest drought impacted not only the availability and conditions of crops (such as corn, wheat, soybeans and rice), but also the availability of animal feed and the condition of grazing pastures – all adding to a rise in food costs likely for years to come. Although $170 million in federal aid has since been pledged to buy meat and poultry to help struggling farmers and ranchers, the question remains: Will this be enough to keep food costs down through the rest of the year?
Economic and Employment Recovery
As indicated above, restaurant industry sales growth has not been as negatively impacted as in most other U.S. industries. But, because consumers’ disposable income is less than in previous years, the restaurant sales growth rate is not what it once was. Despite a rebounding economy and higher likelihood of more discretional (dining) spending, restaurant owners’ expectations should be conservative, even if they remain hopeful that the growth predictions continue to prove correct.
Affordable Care Act
Healthcare is a huge concern in 2013. As the Affordable Care Act goes into effect this year, employers must provide staff working an average of at least 30 hours a week with health insurance or face fines starting in 2014. Therefore, preparing for the implementation of this health care reform will undoubtedly put additional cost pressure (i.e. labor and management costs) on most restaurant operators this year, thus necessitating a review of all operational costs related to employee hiring, training, retention and compensation.
Keeping up with Technology
Streamlining business practices, operating costs, vendor forecasting and guest ordering usually requires upgrading of in-house technology. Bottom line: Sometimes it costs money to save money, and restaurant owners and operators should budget for technological enhancements to their operating systems this year to stay on-trend and at maximum efficiently.
Organic and Sustainable Offerings
Recent restaurant industry studies have shown that seven out of 10 consumers say they are trying to eat healthier at restaurants more now than they did two years ago. ‘Healthier’ to the average consumer now means that they are learning more about industry buzzwords such as ‘organic, ‘sustainable’ and ‘local.’ And after increasing steadily in the last few years, wholesale organic and sustainably grown foods and the costs to purchase and use them will continue on an upward trajectory through 2013, putting pressure on restaurants’ bottom lines.
The takeaway is to be armed with information and to educate yourself about these issues that will potentially impact your business, and to make a plan to address them before they become much bigger concerns that could steer your business off track. Otherwise, talk to a restaurant consultant, and they’ll take care of many of the details for you!
Dan Simons is a Principal and Co-Founder of VSAG and the Managing Partner of The Farm, both of which specialize in restaurant consulting and management. Dan and his wife live in Maryland with their three sons and share an affinity for world travel and exploring hospitality concepts wherever they go.