How 2021 Could Be the Year of the Restaurants

How 2021 Could Be the Year of the Restaurants

How 2021 Could Be the Year of the Restaurants banner

Now that we are several months into 2021, members of the food service profession continue to ask me if better days are ahead. Being data-driven, this resulted in my analysis of industry and economic data to determine what the remainder of the year will look like.

Since January, I have reviewed market research in the food service, lodging, and grocery retail sectors. This includes reports published by the National Restaurant Association (NRA), the American Hotel Lodging Association, the Food Industry Association, The Hartman Group, and Penton Media/Supermarket News, to name just a few. Since the first week of February, the data was analyzed and cross-referenced while the U.S. economic stimulus legislation was in development. During this time, it became clear that if the economic stimulus package were signed, it would ignite the economy through the remainder of 2021 and amplify any positive projections noted in the literature.

As you know, President Biden signed the $1.9 trillion stimulus package into law on Friday, March 12. The impact is going to be massive, and this time, restaurants were not left out. Of the $1.9 trillion, there is $28.6 billion in direct funding for restaurant relief targeting small independent restaurants — the ones hurt the most over the past 12 months. Finally, small restaurants have a tailwind, but that isn’t the only economic factor that will drive expansion. Simply put, people have cash in the bank!

Consumers in the U.S. have accumulated $1.6 trillion in excess savings during the pandemic, as reported by the U.S. Bureau of Economic Analysis. This level of savings is unprecedented and transcends nearly all economic brackets. Pair this with a major shift in vaccination whereby, per President Biden, the entire population over the age of 16 will be eligible starting on May 1, and we are looking at the release of pent-up consumer demand at a time when consumers actually have money. Watch for an increase in gross domestic product in the U.S. that will rival China’s during Q3 and Q4 as all that liquidity and stimulus funds flow into the economy. To put this into context, let’s look back on the statistics from 2020 for a moment.

As widely reported by the NRA, food service industry sales declined 29.8% in 2020 versus the forecast shared in January of that year. Over 110,000 food and beverage establishments closed permanently or for the long term, causing the loss of approximately 2.4 million jobs. The NRA estimates that small mom-and-pop restaurants lost over $135 billion in sales in 2020. The bloodletting was widely reported. However, in January 2021, the NRA predicted total sales of $731.5 billion for the year — a number I now predict is low due to the factors mentioned above, particularly pent-up demand.

Restaurant Industry Sales$864.3B$659.0B$731.5B

Source: State of the restaurant industry 2021 – National Restaurant Association

Simply put, people are sick of eating at home. The percentage of meals consumed at home increased from 75% to 83% during 2020 due to the pandemic. Of the three typical meals consumed at home (breakfast, lunch, and dinner), lunch saw the greatest increase, as more people were quarantined at home and had no choice but to eat in their residence.

Percent of Eating Occasions at Home

Source: Eating Occasions 2020 – Hartman Group

As of December 2020, more than two-thirds of consumers state they were not eating on premises at restaurants as often as they would prefer; this is the highest level in 20 years. Interestingly, the pattern of sourcing food from restaurants declined across all generational groups except Gen Z, where there was an increase during the pandemic. It seems that 18-to-22-year-old people were unafraid of consuming food at or from restaurants, nor were they troubled by the rapid increase in the use of technology to access that food. Gen Z is leading the charge to the new normal.

Percent of Eating Occasions Sourced from a Restaurant
Gen Z (18-22)28%30%+2%
Millennials (23-41)34%33%-1%
Gen X (42-55)23%18%-5%
Boomers (56-73)13%9%-4%

Source: Eating Occasions 2020 – Hartman Group

The rapid pace of recovery in food service is going to a relief but also a bit unsettling due to the return of labor shortages and difficulty finding staff. Demand for meals away from home is likely to exceed the shortened supply in areas where restaurants have closed or where they remained open but trimmed capacity. More important, many restaurants lost or had to cut talent, resulting in a deficiency in personnel as prospects brighten. Though the U.S. government-backed Paycheck Protection Program support for the industry totaled an unprecedented $72 billion as of March 2021, funds were not sufficient to retain millions of lost workers. Replacing lost talent is going to be a problem for restaurants through all of 2021, echoing the number one industry concern prior to the pandemic. This is a hard issue for the industry but bodes well for well-trained industry professionals like JWU alumni and students about to graduate. Members of the JWU community will continue to be part of the solution to the challenges of the past year.

Here are my predictions for 2021:

  • Restaurant industry sales will exceed $725 billion.
  • Labor shortages will return as an industry-wide challenge.
  • The imbalance between consumer demand and restaurant output will take months to equalize.
  • New restaurant openings will increase during Q3 and Q4.

Demand for restaurants, as fueled by excess personal savings, economic stimulus, and rapidly expanding vaccination rates, will drive owners and investors to innovate and expand while under constant pressure to find and retain talent. The pandemic will release its grip on one of our hands, while labor shortages and unprecedented growth will take hold of the other. I would much rather face the latter crisis than the former. Enjoy your dinner!

If you’re interested in a career in food service management, learn more about earning your bachelor’s degree in Culinary Arts & Food Service Management from JWU. For more information, complete the Request Info form, or call 855-JWU-1881.

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