Restaurants and the grocery store are two places consumers have definitely felt inflation; however, prices at the supermarket have recently risen even more than prices at restaurants.  In fact, July saw the biggest inflationary gap between grocery stores and restaurants since the 1970s.  The restaurant industry is still facing challenges, like a drop in demand and labor shortages, as it still continues to recover from the pandemic.  Sean Kennedy, Executive Vice President for Public Affairs for the National Restaurant Association, joins Cheddar News' Closing Bell to discuss.

Closing Bell

National Restaurant Association EVP Talks Challenges Facing the Restaurant Industry

Welcome back to closing bell on Cheddar news everyone to places, consumers have really felt inflation restaurants and also the grocery store, but prices at the supermarket have recently risen even more than prices at restaurants. In fact July saw the biggest inflationary gap between grocery stores and restaurants since the 1970s. But the restaurant industry is still facing challenges like a drop in demand and labor shortages as it continues to recover from the pandemic. And joining us. Now, sean Kennedy, executive vice president for public affairs for the National Restaurant Association. Thank you for joining us. We know this gap. Yeah, of course. We know this gap has led to restaurants touting their prices with some arguing that dining out can be less costly than cooking at home actually. So what is your gauge currently, do you think restaurants are a better choice for consumers and grocery stores, especially when it comes to buying food in the most cost effective way, not just necessarily what your interest maybe in terms of dining Asia, what we've seen so far continues to be record level increases in basic consumer products when it comes to restaurants and grocery stores. So you have a grocery store prices up 13%. Restaurant prices only up 7.6%. Where really where where consumers really see that differences in some of these commodity prices, eggs up 224% Butter, flour 26%. These double digit and triple digit numbers just aren't sustainable for a lot of families right now, it's certainly gonna put a lot of challenges for small business restaurants that are looking to find a way to keep their meager profits high enough they can keep their doors open. So it sounds like the grocery store is still the way to go if you're looking to save money and stay on a budget while dining. Right? Well, no, it's it's right now. Again, grocery store prices are up twice as much as restaurant prices right now. We're still seeing the ability we can serve folks is we're still dealing though, as you noted in the opening labor shortages and inflation aren't helping a restaurant, a sector that is really struggling to come out of this pandemic with a lot of debt from government mandated closures. Yeah. Sean another really interesting facet of this whole thing is that earnings reports are showing us there's been an increase in wealthier customers actually heading to fast food and fast casual chains, but lower income americans are cutting back on their restaurant spending across the board. So as these wealthier customers low, look to fast food to escape those higher grocery store prices that you were just talking about? How do you think these brands can work to lower back their traditional customers on the lower end of the spectrum? Is that something that can be done right now? Or is that something that you see further down the line when it comes to this inflationary environment. No, it's a great, it's a great challenge for the industry because again, most restaurants were operating on an incredibly small profit margins, but we also are very cognizant of the fact that we are not a necessity. Families can vote with their wallets every week or weekend on where they're gonna spend their dollars as far as what we can do to lower our own prices. You're seeing a lot more restaurants are simplifying their menus. They're taking some ingredients perhaps that they don't need out. But they're also making sure that people who come into are still not going to see a change in the quality and taste and value of the meals that they're coming in to enjoy. Uh, in general, we are still seeing an increase in restaurant turnout. But there are a lot of warning signs right now from the industry as to whether or not economic conditions will worsen over the next six months before I kind of stick with that. Can you talk about what some of those warning signs are that you're seeing? We just released a survey this week Asia showing that 43% of operators believe that economic conditions are going to worsen In the next six months. That's the highest level of pessimism from restaurant operators since 2008 and these are the men and women who are on the ground, they are serving their communities every day. They are not liking what looks ahead for them right now. And that's got to be a big challenge. And here in Washington, we're doing what we can to make sure Congress and the White House are equally engaged in supporting the nation's second largest private sector employer. Yeah, really fascinating. As we've seen over the past couple of weeks with gas prices coming down and other energy costs kind of cooling. The sentiment has been changing, but it's still remaining for a lot of these businesses. I do want to ask you about the fact that so many of these restaurants are facing these challenges, but at the same time we're seeing a lot of them. I want to mention Starbucks also bloomin brands which owns outback steakhouse. They're saying they haven't seen a pullback in their customers. So do you think there's a special sauce pun intended that allows a lot of these businesses to be immune to some of these pressures and challenges or is that just something that's built in because of their customer base? Look, every every brand has got their own challenges and opportunities. But the labor laws of gravity are inescapable. We are still 635,000 jobs lower than where we were before the pandemic. So it doesn't matter if you are the most established brand or a scrappy upstart. You are seeing challenges in getting workers to at the tables behind the bar in the kitchen and that's gonna affect everyone equally. So we are all ready to serve communities. We need to make sure that we have an infrastructure in place that will allow us to support that business model. Okay. And last one here, I just have about a minute left with you. But a study from ad tracking firm I spot found there's been a recent increase in deals and rewards offered by restaurant brands. What do you think about the strategy? Is this overall helpful for the industry or do you think it could be a hindrance every most restaurants they they want to get by on word of mouth? It is customer support its customer loyalty. We're going to continue using as many incentives as we can to reward customers who are are long time fans of a local restaurant. You're not gonna see that stop up. It used to be something that only the largest brands were doing. Even the smallest ones are now doing apps and rewards and doing what they can to bring those repeat customers back to their tables every week. Alright sean Kennedy, Executive vice president for public affairs at the National Restaurant Association really appreciate you coming on the show. Thanks so much