In 2022, the restaurant industry witnessed a welcome return to financial health as the disruptions caused by the pandemic began to recede. However, experts suggest that 2023 will bring a fresh set of challenges for restaurant operators. As inflation drives menu costs higher and impacts consumers’ discretionary spending capacity, restaurant owners are faced with challenging choices to maintain competitiveness and profitability.
Here are the five key trends that will shape the restaurant industry in 2023…
1. Consumer Behavior in Response to Inflation: As the cost of living rises, consumers are becoming increasingly price-conscious. A survey by Medallia Market Research found that 49% of respondents considered price a significant factor in their household decisions. With inflation impacting their purchasing power, many diners are opting for more affordable dining options like quick-service restaurants (QSRs) or value-focused meals. For low-income consumers, dining out may become less frequent. Restaurants will need to strategically price their menus, especially as supply chain disruptions are expected to increase ingredient costs.
2. Strong Job Market and Consumer Spending: Despite economic challenges, the job market remains robust, and consumers have accumulated approximately $1.7 trillion in extra cash compared to 2019. While this amount is gradually decreasing, it still provides a cushion for restaurants in 2023. Experts believe that any economic slowdown or recessionary impact may not materialize until the third or fourth quarter of the year. Providing restaurants with an opportunity to recover lost profitability.
3. Supply Chain Disruptions and Construction Delays: Supply chain constraints are expected to persist in 2023, impacting restaurant development plans. Delays in construction projects are poise to escalate the expenses associated with constructing and refurbishing restaurants. In 2022, many restaurants reduced operating hours, especially independent operators, who reduced their weekly hours by an average of 7.5.
4. The Evolution of Ghost Kitchens: Some pandemic-era restaurant models, like ghost kitchens, may begin to lose relevance in 2023. Ghost kitchens encountered difficulties stemming from declining delivery demand and food quality concerns. Consumer confidence in online brands continues to be a pressing issue. More and more customers are seeking well-known and trusted brands when dining out or ordering food. Which can significantly influence the success of ghost kitchens.
5. Menu Strategy and Dynamic Pricing: Restaurants will need to reevaluate their menu strategies and sourcing practices to protect their bottom lines amidst fluctuating ingredient costs and operational pressures. Streamlining menus by removing less profitable items and adopting dynamic pricing strategies during peak hours can help maximize profits. Digital technology enables operators to adjust offerings and prices multiple times a day, but consumer adoption of dynamic pricing may be gradual.
Although 2023 poses various challenges for the restaurant sector, such as inflation, supply chain disruptions, and shifting consumer preferences. Restaurants that strategically navigate these trends and prioritize efficiency are likely to thrive in this dynamic environment.