MRA report suggests continued growth
Second-quarter 2017 survey highlights increased food sales from first quarter, but also increased costs for food and labor.
The Michigan Restaurant Association’s (MRA) industry trends report for the second quarter of 2017 indicated improved sales compared to the first quarter and confidence that sales will continue to grow into the second half of 2017.
Participation was strong in the second-quarter trends report, with approximately 500 MRA member locations and $689 million in annual revenue represented in the survey.
The survey highlighted sales across Michigan increased by 3.2 percent, which is an improvement from the first quarter that only saw a softer increase of 1.7 percent, but still behind 2016’s numbers.
Other highlights from the survey include 71 percent of respondents saying they were optimistic that sales growth would be better in the second half of 2017 and an increase in food costs after an 18-month deflation cycle. Food costs rose to 32.4 percent in the second quarter from 31.9 percent in the first quarter, which still is below the overall percentage of 32.6 in 2016.
Another important trend is the heightened cost of labor for the food industry. The second quarter experienced a slight decline in the cost of labor, 30.4 percent compared to last quarter’s 30.7 percent, but still above 2016’s 30 percent.
“There’s been some wage pressure on this industry,” said Justin Winslow, CEO and president of MRA. “That comes with any economy that’s thriving. You’re having to go out, pursue and retain your talent.”
Findings from the U.S. Bureau of Labor Statistics indicate the average annual pay for restaurant employees in Kent County has gone up steadily over the past decade. In 2006, the average annual pay was $12,193, and it gradually rose to $16,646 in 2016.
Additional findings suggest a healthy economy statewide, with unemployment below 5 percent. But the scarcity of unemployed individuals also implies a struggle for food service businesses to hire new employees. Winslow also emphasized a particular scarcity of qualified cooks, saying many people don’t possess the skills or experience to fill such positions.
When asked what their expectations were for their number of employees within the next six months, 62 percent of respondents said they expected employment numbers to remain steady, while 31 percent expected numbers to increase and 7 percent expected them to decrease.
Winslow added different segments of the food service industry are having diverse experiences.
“We’ve seen independents doing better for a while now,” he said.
Pal’s Diner, a small 1950s-style eatery in Cascade Township, would agree. Owner Barry Brown, soon to be retired, has been in the food service industry for over 60 years. Brown said his business has experienced an increase of 25 percent in the past six months, which he attributed to the millennial generation spending more of their time and money at local establishments.
“The trend seems to be in the direction of home cooking and away from franchise restaurant food,” he said. “We’re seeing this on a national level, with IHOP and Applebee’s shutting down in some locations.”
Pal’s Diner also has experienced an increase in the cost of food supplies, mainly attributed to the cost they have to pay suppliers and delivery people. But to keep costs down on the customer’s end, they regulate a lot of their menu options.
“We’re not like a franchise where they change the menu every three months,” Brown explained. “We’ve kept our menu down, controlled promotions. We look for the best sales ourselves, like two for one on bread; that’s how we try to keep the cost down.”
Brown added the scarcity of labor in the food industry comes down hard, particularly on small venues.
“We’re a small restaurant, so if an employee can’t come in, there aren’t many others who can take their shifts.”
Among company types, 61 percent of survey respondents were single-unit independents, 17 percent were multiunit independents, 11 percent were multiunit franchisees, 7 percent were single-unit franchisees, 3 percent belonged to a multiconcept restaurant group and 2 percent were part of a corporate-owned chain.
Among restaurant types surveyed, 32 percent were casual dining, 16 percent were family dining, 13 percent were fast food, 13 percent were pubs or bars, 9 percent constituted fine dining, 4 percent were fast casual, 3 percent were cafés or coffee shops, 2 percent were caterers or food service contractors, 1 percent were brunch venues and 7 percent identified as “other.”