Full Service Restaurant

How the Restaurant Industry Performed in Q1 2023

Apr 26, 2023

How the Restaurant Industry Performed in Q1 2023

In a sign of ongoing challenges, half of U.S. restaurants reported lower profits in the first quarter of 2023, according to researchers at Technomic.1 Rising wages and food prices continued to put the squeeze on operators even as consumer attitudes towards rising prices appear to be softening.

Labor and food costs continue to eat into restaurant bottom lines

Virtually all operators surveyed (99%) report that business expenses rose during Q1, led by the cost of labor, food and beverages.1

On the labor front, 83% of restaurants said they had raised wages over the last three months, compared to only 70% in the final quarter of 2022.1 The difficulty of finding qualified labor is forcing operators to compete harder for talent by boosting hourly wages.

QSR leads the way in traffic growth at restaurants

Overall, restaurant traffic increased 2% in the first quarter of 2023 but still remains 5% below 2019 levels.2

With a 2.7% increase in traffic in the first quarter, QSR traffic levels sit only 1% below 2019 levels. This growth may have come partly from consumers trading down to QSR from full-service restaurants. The full-service segment saw traffic decline by 0.7% over the same period.2

Consumers are adjusting to rising prices and fees

According to recent data, consumer concern for high prices has decreased slightly from last quarter, with a 5-point drop. This shift in sentiment may indicate that consumers are gradually adapting to and accepting the current pricing trends.1

This seems to be affecting consumer behavior in the foodservice industry as well.

  • The number of consumers who claim to visit restaurants less frequently due to high prices dropped by 10% in Q1 2023.1

  • The proportion of consumers who anticipate further increases in menu prices over the next six months has fallen to 58% from 61%.1

  • The change in consumer sentiment is also evident in their opinions about service fees, with more willing to pay fees exceeding 5%.1

According to Technomic research, consumers remain willing to spend $1-$3 more for a menu item they want.1

Restaurants remain resilient in the face of continuing challenges

In reaction to rising expenses, operators are seeking ingredients and technologies that reduce costs and labor. This, in turn, is driving interest in more affordable ingredients, value-added components and labor-saving technologies.

To that end, here are some value-added Simplot products that can help you maintain margins without sacrificing quality:

Simplot RoastWorks® Roasted Vegetables & Fruit: The best-selling line of frozen, roasted vegetables in foodservice. Serve on-trend, roasted flavor and color without the work and waste.

Simplot Ready-to-Eat (RTE) Frozen Vegetables: They make prepping salads, grab-n-go items and meal kits a breeze—just thaw and serve, no cooking required.

Simplot Conquest® Delivery+® Fries: With the industry’s longest hold time (40+ minutes!), these fries reduce waste and virtually eliminate complaints about soggy fries in delivery, takeout and dine-in.

Simplot Harvest Fresh™ Avocados: Serve the quality of 100% Mexican Hass avocado pulp, guacamole, dices and halves with minimal labor, consistent pricing and year-round availability.

Overall, operators remain hopeful as they adjust to the “new normal.” In spite of wage and price pressure, the vast majority (85%) are confident their businesses will still be open six months from now, up from 80% in November 2022.1

1 Technomic, Consumer Operator Outlook Report, Q1 2023
2 NPD/CREST, Q1 2023