Recap: State of the Restaurant Industry, New York City – March 2019
March 19, 2019 | Nandkumar Awatramani

Recap: State of the Restaurant Industry, New York City – March 2019

I recently attended the State of The Industry Presentation by Andrew Rigie, Executive Director of the New York City Hospitality Alliance. I came out with critical information that not only New York restaurateurs should know about but restaurant owners across the US and other major cities globally should pay heed to, because what happens here will sooner or later trickle down to other cities like New Orleans, Houston, Philadelphia, Toronto, London, Mumbai, Sydney and other cities.

Personal note: I am absolutely amazed at how difficult it is to own and run a restaurant business in New York. I understand that every big city will have their way of getting things done, but the more I learn about the challenges NYC restaurateurs have to face in order to make money, the more I respect the dedication and passion of these amazing entrepreneurs.

Here’s the summary to the event:

More restaurants and less customers. There are more restaurants than ever before. Customers are choosing to eat at home more. Retail Delis are beginning to eat into the lunch and dinner business. The Creativity and the uniqueness within restaurants are helping independent restaurants to outperform chained stores. The minimum wage has risen in 18 states, including New York.  Restaurant margins are dropping. Domino’s has introduced its online chatbox function within its physical stores to enable customers to place an order using virtual reality, this is one of their strategies to maintain labor costs and margins. Social media is helping brands increase revenues by creating a higher level of trust between customer and brands. New York nightlife will face many challenges in increasing revenues mainly due to the potential legalization of cannabis in New York in 2019. Customers will choose not to mix using cannabis and consuming alcohol together. Many large brands will cash in on the late night snack business to cater to the munchies post consuming cannabis.

Most of the information below pertains mainly to New York, but if you own a restaurant in any part of the country or world, try and gather the trends in the information below, so you’re prepared for them when they begin to influence the way you do business in your city.

Supply:

  • Growth in the restaurant industry has increased by 2%.
  • 13% increase in the number of restaurants between 2009 to 2017. There is an oversupply of the number of restaurants because it’s become easy to find or raise money to start a restaurant.
  • Independent restaurants have been seeing the highest organized growth as compared to chains and have also been outperforming the chains.

Changing Eating Trends:

  • More people are eating at home. Packaged food companies are automating most of their processes hence they are able to reduce their prices, making it cheaper for restaurant customers to choose to eat at home 1 or 2 times more per week.
  • Retail Delis have grown to 4.4% from 3.3% (2016)
  • QSR’s are investing big money in promoting their $1 meals.

Lower Margins:

  • The minimum wage has risen in 18 states, including New York. Restaurant margins are dropping.
  • 62% of restaurant operators have seen an increase of 3%-9% in labor costs
  • 16% of restaurant operators have seen an increase of 9%-12% in labor costs
  • 73% of restaurant operators have increased their menu prices
  • 43% of restaurant operators are reworking their menus and costs
  • 31% of restaurant operators are looking to reduce the number of employee jobs/hours
  • Domino’s has introduced its online chatbox function within its physical stores to enable customers to place an order using virtual reality and pick up their food at the counter.

  • Many restaurants including big chains are reducing nonessential employees (hostesses, order-takers, night cleaning staff, etc.) as a way to maintain labor costs
  • More and more brands are depending on technology to increase revenues. Dominos, Starbucks are the top 2 brands who have successfully used mobile ordering to increase revenues.

The Use Of Social Media and its impact on Revenues:

  • Consumer transparency will triumph over all other marketing activities. The latest Dom Ticker (Dominos) at Times Square displaying the latest tweets from happy and unhappy. customers (see image) has been a novel and breakthrough way the company has shown its commitment to transparency and to listen to and improve their customer experience.
  • Instagram has proven to help increase new store sales by capitalizing on more than local brand recognition and awareness allowing for companies to open new stores in other cities and countries and immediately see an uptick in revenues.

The future with Cannabis and its impact on Restaurants and Nightlife:

  • New York State will most likely legalize Cannabis in 2019.
  • The Cannabis industry is paying employees anywhere from $25 – $30 per hour and will make it even more difficult for restaurants to attract and retain talent.
  • Restaurants and Delis who position themselves near cannabis dispensaries have seen an uptick in revenues in other states and the restaurant owners who follow suit in New York will see similar returns.
  • Chipotle (and other food businesses) has already begun advertising late night snacks to compliment the growing use of cannabis in other states and New Yorkers should expect large brands to eat into dinner business in the city.
  • Pregaming or ingesting cannabis before going for dinner is becoming a trend, and many people wish to not mix cannabis with alcohol, making the sale of alcohol during dinner and nightlife even more challenging.

Phew! Thats a lot for one year for any city. But, it’s not all bad. There are many restaurants finding innovative ways of overcoming these current challenges, cashing in on trends or preparing for upcoming challenges to increasing revenues and profits in the next few years.

The important thing is to keep looking outside the box for suggestions and techniques that will help you increase revenues and grow your business, because what was working in the restaurant business, no longer works as well.

At F and B Business School, we share the industry’s best business practices to help you look outside the box and learn about solutions used by other industries to overcome similar challenges we face in the restaurant industry; like high labor costs, employee turnover, low margins and long working hours. We have found proven solutions to overcome these challenges and we share these techniques via our blogs, online programs, and webinars.

We wish you the best and don’t forget to check in from time to time to see what’s new and how you can use that to improve your business and life.

Cheers

Nandu Awatramani
Founder

P.S. Sign up for the latest trends, proven business techniques and interviews and webinars with industry personalities and thought leaders.

F and B Business School
An online school to share, inspire and teach the restaurant industry’s best business practices to owners who are committed to improving their business and life.

EXITING OR SCALING: Thinking about scaling your restaurant business? Attracting financing or investors? bringing in new partners to grow domestically or internationally? Get in touch with us.  Learn what it takes to scale restaurant businesses profitably and get 3X or more valuation. Get in touch here.

EDUCATION: Online programs to help you increase revenues, stop employee turnover and scale your restaurant or food business. We share insights, techniques, and tools successful restaurant owners use to grow and scale profitably.

COACHING: Avoid common pitfalls owners make when growing their business. Learn what it takes to prepare your business for growth, whether you’re bringing in a partner, an investor or planning on growing it yourself. There are different skills required to grow a restaurant business from 1 to 3, 3 to 5, 5 to 10 and 10 to 20 and beyond. Learn what they are, so you can overcome challenges that may prove very costly to your time, energy and your capital. Interested in working in a group or one-on-one? Click here.

SPEAKING: Interested in having the latest trends, insights, and techniques presented to your team or audience at your yearly retreat. Hire an industry expert and professional speaker here.

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