By Mike Finney

Nearly two years into the pandemic, restaurants are still struggling to keep their doors open amid a coronavirus surge, inflation, a labor shortage and supply chain delays, according to the Delaware Restaurant Association.

“It’s dangerous to see restaurants open and think that everything is OK and profits have returned,” said Carrie Leishman, president and CEO of DRA. “Industry subsidies and relief programs in 2020 helped, but the reality for restaurants is that business conditions are more difficult now than a year ago, during the height of the pandemic.”

Alarmingly, the state’s restaurant industry remains down 4,300 jobs from pre-pandemic levels, as data from U.S. Bureau of Labor Statistics showed Delaware leisure/hospitality jobs at 49,100 in December 2021, down from a high of 53,400 in December 2019.

Nationally, the industry still hasn’t re-created the more than 650,000 jobs lost early in the pandemic, a rate that is 45% more than the next closest field.

DRA has also released new survey data highlighting the impact of the omicron variant and the rapid deterioration of conditions for First State restaurants.

According to the survey:

• 90% of restaurants experienced a decline in demand for indoor dining in recent weeks.
• 86% of operators report that business conditions are worse now than they were three months ago.
• 80% say their restaurants are less profitable now than they were before the pandemic.
  DRA also reported that state restaurants took a number of actions recently, as a result of the surge:
• 70% reduced hours during days they are open.
• 50% closed on some days when they would normally be open.
• 30% reduced seating capacity.
• 7 in 10 employers say their restaurant currently does not have enough employees to support customer demand; most operators expect their labor challenges to continue through 2022.

Confidence drops, as business conditions worsen

Consumer spending in restaurants trended steadily higher during the first half of 2021, driven by rising vaccination numbers, the easing of capacity restrictions and healthy household balance sheets, according to the National Restaurant Association.

However, that positive trajectory stalled during the second half of last year, with sales dropping back below pre-pandemic levels by December — the lowest monthly reading since August 2021.

The national association also shared that the percentage of U.S. adults who say they feel comfortable dining out has fallen nine points since Oct. 30, 2021. Additionally, 51% of adults report that they aren’t eating at restaurants as often as they’d like.

To make matters worse, eatery operators are dealing with a material increase in costs across the board, as U.S. inflation hit 7% in December (marking the fastest pace since 1982).

That is difficult to swallow for an industry that typically generates, under good conditions, 3%-5% profit margins.

Coupled with the labor inflation necessary to retain enough workers to keep their doors open, Delaware restaurateurs say they are finding themselves in the middle of a storm.

Survey data also reveals:

• 68% of Delaware restaurant operators report lower sales volume in 2021 than in 2019.
• 83% of them say their costs were higher in December 2021 than in December 2020.
• 74% of the operators report slower customer traffic in 2021 than in 2019.
• 96% of national restaurant operators experienced supply delays or shortages of key food or beverage items in 2021.
• More than half of operators nationwide say it would be a year or more before business conditions return to normal.

“More support is vital to meet the current challenges our industry is facing,” Ms. Leishman said. “Labor and inflationary pressures, as well as a mask mandate that our neighboring states do not require, have added increasing pressure and tensions to our workforce.”

Sustained support for restaurants needed

While the bipartisan passage of a bill permanently allowing to-go alcohol sales was a small victory for restaurants in Delaware, more support dedicated to sustaining the industry during this critical climb toward recovery is vital, DRA said.

Recent independent polling shows continued strong support for restaurants, including alcohol to-go:

• 84% of Delaware adults said they favor permanently allowing takeout of alcoholic beverages with carryout food orders.
• 92% of adult residents got takeout or delivery during the past 22 months.
• 27% report adding an alcoholic beverage to their carryout order.

Federally, the Restaurant Revitalization Fund served as a lifeline for many owners, but an initial round of funding in May 2021 was quickly depleted and fell short of needs, leaving roughly two-thirds of applicants approved but never paid, industry officials report.

More than $67 million in RRF grants were awarded to Delaware operators, but that represents only 37% of local applicants, DRA said.

According to an NRA analysis, the first round of RRF funding saved an estimated 2,000-plus jobs in state restaurants, assisted 78% of recipients to stay in business and helped retain/hire back employees that otherwise would have been temporarily or permanently laid off.

In addition, 13% of restaurant operators who did not receive RRF grants feel it’s unlikely that they will stay in business beyond the pandemic without the funding.

NRA also estimates that awards granted with replenishment of RRF would potentially save more than 3,000 jobs in Delaware that are at risk.

The national group said the First State’s restaurant industry recovery is paralyzed and nowhere near complete. As Congress works to provide a further financial lifeline, the following are actions the organization believes leadership could enact to help:

• Immediate reinstatement of targeted relief funds to Delaware restaurants.
• Support of an immediate moratorium on the industry’s gross receipts tax.
• Support of a moratorium of regulatory/licensing fees for two years.
• Introduction of flexible labor laws for entry-level teen workers.
• Limit of regulatory barriers for reentry individuals.
• Subsidies for mental health and health benefits for front line workers.
• Opposition of legislation that negatively impacts restaurants and/or threatens the rebuilding of its workforce.
• Clear timeline on removal of the mask mandate.
• Support of pro-small business and pro-restaurant legislation.

According to DRA, Delaware’s 2,000 restaurants employed more than 53,000 people, with an impact of over $2.5 billion in annual sales, prior to the pandemic. Additionally, the field is the largest small-business employer in the state and the largest component of its tourism industry.