While the days of pandemic shut downs are behind us, the effects COVID-19 had on different industries are still unraveling. As an industry that heavily relies on in-person experiences, restaurants saw a significant decline in sales and subsequent store closures. In the first 6 months of the pandemic the National Restaurant Industry estimated there were nearly 100,000 restaurant closures representing roughly 1 in 6 restaurants in the US. As the son of restaurant owners in Los Angeles, I saw first hand how difficult and stressful these times proved to be for small business owners. This article will analyze changes in labor and sales for restaurants from 2019-2023 using data from the US Bureau of Labor Statistics (BLS) to show how the longer term effects of COVID led to higher sales for the industry.
Restaurant Employment
In 2023, the BLS reported a total of 13.6M restaurant workers in the US, representing 8% of the workforce. Impacts to restaurant employment has effects on a wider population considering 63% of US adults have worked at a restaurant at some point in their careers. The BLS segments restaurant workers into 4 categories: Supervisors, Cooks and Food Preparation, Food and Beverage Serving, and Other. Serving accounts for over half of the workers in the restaurant industry.
COVID caused a massive shift in restaurant employment. In 2019, the BLS reported 13.8M workers in the restaurant industry with a subsequent decline of 16% in 2020 to 11.6M workers. While employment has largely recovered, the make-up of how these jobs are distributed drastically changed. Compared to 2019, 2023 saw an increase in the number of Supervisors and Cooks, and a decline in the number of Serving workers. A further breakdown of Serving workers shows the largest decline came from waiters/waitresses likely since full service restaurants were one of the most affected during COVID. Notably, the only category of Serving workers that saw an increase in the number of jobs were bartenders.
Restaurant Sales
Along with tracking employment numbers the BLS also tracks output (i.e. sales) by industry. In 2019 BLS reported $767B in output from restaurants with a decline of 13.5% in 2020 to $663B. Restaurant sales did not recover to pre-COVID levels until 2022 but set record sales in 2023 with $981B in total output. While the BLS has not posted their 2024 numbers, some industry groups are predicting 2024 to be another record year with sales reaching over $1T.
Perhaps the biggest impact the industry has seen in post COVID years is the shift towards consumers spending a higher share of total food spend on Food-Away-From-Home. The US Department of Agriculture tracks the yearly share of consumer spending on Food-at-Home and Food-Away-From-Home. While consumer spending has been steadily increasing towards more money spent on food away from home, 2023 represented the highest share ever with over 58% of total food spend being spent away from home.
Higher Output per Employee
Despite restaurant labor staying relatively flat from 2019 to 2023, BLS data shows the industry had 28% more output in 2023. Part of this increase can partially be attributed to higher prices but overall output/employee increased from $55.7k to $72.2k meaning employees are now more productive. What is the main driver behind this change?
Online ordering and delivery were already growing across the industry; however, out of necessity COVID sped its adoption. Circana reported digital orders for carry-out increased by 115% from 2020-2023. For customers ordering on site, COVID prompted the need for touch free experiences, accelerating the use of self ordering kiosks. The combination of these technologies allowed customers to fill the role of a cashier, and thus the need for servers declined. By reducing the workload required to take orders, restaurants were able to shift their labor towards more cooks and subsequently increase their total output.
While online ordering and kiosks are widely prevalent in the restaurant industry, technology in kitchens has failed to see the same adoption.
Restaurant Kitchen Automation
Although restaurant sales are increasing, restaurants are facing headwinds in the form of rising wages, and higher food costs. For restaurants to succeed in the future, they will need to find ways to further increase their output per employees. This opens the opportunity to develop and adopt new technology in kitchens.
In the US, there have been many attempts at automating restaurant kitchens, but adoption remains limited. Zume Pizza, founded in 2015, raised over $400M to grow a robotic pizza concept but ultimately closed its doors. Spyce Robotics, an MIT founded start up, operated two locations in Boston prior to being acquired by Sweetgreen in 2021. Today, Sweetgreen has opened a few locations they call “Infinite Kitchens” powered by robotics. Chipotle is partnering with several companies including Vebu and Hyphen to pilot robotics at some of its stores but time will tell how these technologies will scale across their locations and eventually other restaurant chains.
Automation normally raises concerns of job loss; however, COVID was an accelerator for food ordering automation that did not destroy jobs but instead shifted them to other roles in restaurants. While kitchen automation may not necessarily reduce food prices in restaurants in the short term (rarely do restaurants ever reduce prices), over time, it may keep the cost of eating out in line with the cost of eating at home; ultimately, unlocking a future where restaurants prepare a larger portion of meals consumed in the US.
