As prices rise, some restaurants see fewer customers – Boston Herald

As prices rise, some restaurants see fewer customers – Boston Herald

Alejandro Martinez says sales at his Winter Springs restaurant, Stefano’s Trattoria, aren’t growing like they have since he bought the place in 2014.

Since Easter, he said, they are either slightly down year-over-year or only slightly up, depending on the day, not at the 6% to 10% growth he’s seen in the past few years.

And while his sales remain higher than in 2019 before the coronavirus pandemic transformed the restaurant industry, more expensive food costs and higher wages for employees have cut into profits. Martinez said after buying the restaurant he didn’t raise his menu prices for five years, but he has had to increase them three times since 2021 to cover higher costs.

Restaurants across the country are continuing to raise prices and reporting fewer customers coming in the doors.

In the National Restaurant Association’s June restaurant performance index, 57% of operators reported a decline in traffic from last June. This was the third straight month of decline, leading the association to say the current situation was “dampened.”

Same-store sales, different from traffic, weren’t as negative, with 40% of operators saying they were lower in the June report, and 50% saying they were up from last June.

Alejandro Martinez is pictured at Stefano’s Trattoria in Winter Springs on Tuesday, August 8, 2023. (Stephen M. Dowell/Orlando Sentinel)

The restaurant performance index for June was at 100.2, just barely above what would mean the industry’s health is neutral, according to the association. Industry indicators are expanding when the index is above 100, and contracting when it is below 100. The index was at 99.6 in May.

The lackluster conditions come as some high-profile Orlando eateries such as Winter Park’s The Coop have shut their doors, citing higher rent costs. 

Some consumers, meanwhile, say they are cutting back because of restaurant prices. Keisha Montes, 28, of Orlando, says she used to eat out for every meal from Friday night through Sunday, but during the past six months has switched to just dinner on Saturdays and lunch specials on Sundays.

“It makes me feel sad,” Montes said. “When I go out with my friends, when I go out with my partner, I like to connect over food. I like to drink and talk. I like to connect with cultures over food.”

A dinner out at a restaurant used to cost Montes $30 to $40, but now that is up to $60 or $70, she said.

Year-to-date, restaurant menu prices have gone up 8.3%, the highest rate since the early 1980s, while grocery prices were up 7.9%, said Hudson Riehle, senior vice president of the National Restaurant Association’s research and knowledge group, in an online video.

San Diego-based restaurant analyst John Gordon told the Orlando Sentinel that restaurant menu prices in the long term should not outpace increases at the grocery store.

“While there is a segment of people that will always go out to eat all the time… there is still quite a number of people that will always see eating in as more economical and more easy,” Gordon said.

But not every restaurant is losing customers, even with higher prices.

The Orlando-based Hawkers chain’s traffic was up 8% during the first six months of the year, said spokeswoman Esther McIlvain. Its year-to-date price increase is at 5.1%.

CEO Kaleb Harrell said he believes consumers are turning to more experiential restaurants like Hawkers for the nights they do decide to go out. He said his restaurants concentrate on having a high-energy environment, aiming to give guests more of a night out than just a meal.

“At the end of the day, good economy, bad economy, people are going to choose brands that have great food, great service, great vibes,” Harrell said.

The privately owned chain has 14 restaurants and more than 1,000 employees.

Hawkers made headlines in 2021 for giving workers raises and increasing its non-tipped minimum wage to $15 an hour, leading to improved staffing.

Hawkers Asian Street Food’s staffing woes were a mess. Raising wages fixed it.

Those investments have paid off, since the money going to paying an employee more can be absorbed with more productive, longer-tenured workers thanks to low turnover, Harrell said.

“What kills the labor line is turnover,” Harrell said. “We’ve reset the bar with our team members.”

Back at Stefano’s, Martinez said he believes restaurants are returning to their normal business cycles after customers spent more in recent years thanks to government stimulus money.

“Demand was so high, so high,” he said. “Then demand went back to what is normal. Summers are supposed to be slow.”

Looking ahead, restaurant operators across the country aren’t exactly optimistic. The National Restaurant Association said 34% think overall economic conditions will get worse in the next six months, and only 10% expect improvement.

Martinez shares the outlook, even though he believes his own restaurant will succeed thanks to its strong staff of 37 employees.

“I don’t see the economy improving. I see the economy taking some backsteps in the near future … I see inflation not going anywhere,” Martinez said. “A lot of restaurants are going to fail in the next year.”