A businessman standing on a ladder, looking through a telescope, with 2023 and clouds in the background — Photo by Vecteezy.com

As many of us have left the pandemic behind in 2022 and begun traveling again, airlines have begun seeing profits. Some tourist destinations also recorded the highest-ever RevPAR (revenue per available room, a key hotel performance indicator).

The foodservice industry is recovering too. According to National Restaurant Association’s forecast in January 2022, the foodservice industry would make $898 billion in sales for the year, exceeding $864 billion in 2019. Entering 2023, will restaurant sales continue to grow? Or, will high inflation and uncertainty of the economic outlook negatively affect sales in the foodservice industry?

Regardless of where we stand, the foodservice industry must overcome many big operational challenges to thrive in 2023. To start off, let’s visit food and labor costs, the two costliest items on the balance sheet.

Food prices are unlikely to fall

General inflation is easing, but not for most essential food items (Han, 2023). On average, consumers were paying $4.25 for a carton of Grade A large eggs in December 2022, a jump from $1.79 a year ago. An outbreak of bird flu, high inflation, and cage-free-egg laws imposed by some states might be the reasons. Average butter prices went from $3.47 a pound a year ago to $4.81. Margarine, usually used as a substitute for butter, also saw a 43.8% year-to-year increase in December 2022.

Moreover, the global food supplies in grain, oilseed, corn, wheat, and soybeans are projected to decline for the fifth consecutive year in 2023. It is unlikely for the industry to get a break from the rising food cost in the new year.

Labor shortage is not as bad but with a price

Restaurants workers were finally returning in December 2022 (Haddon & Weber, 2022). Higher wages, better working conditions, and a weakening labor market (i.e., more layoffs in the financial and tech industry) contributed to the improvement. More importantly, the share of job seekers interested in foodservice and restaurant jobs had resumed to the pre-pandemic level.

The catch is that business owners must pay a higher wage. In October 2022, the average hourly wage for fast-food workers was $15.17, 26% more than the pre-pandemic level. An average sit-down restaurant worker was making $18.70 an hour, a 21% increase from pre-pandemic. As workers will continue demanding higher wages and better working conditions, businesses must set a higher budget to attract and retain employees.

Changes are coming

McDonald’s announced that it would join other big corporations across different sectors to trim its labor force (Haddon & Glazer, 2023), which would likely transform the company with a leaner organizational structure. McDonald’s also plans to revamp its offerings and update its restaurant formats, such as stand-alone kiosks selling desserts or coffee. If McDonald’s is not alone, the question is how many other restaurant chains will follow suit.

How positive do you feel about the 2023 outlook in the foodservice industry? What changes do you expect to see?

Linchi Kwok
Professor at The Collins College of Hospitality Management, Cal Poly Pomona
CAL Poly Pomona

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