The foodservice industry expects to employ 15.7 million people in 2024—a record, according to the National Restaurant Association.
Still, 45 percent of restaurant operators say they need more employees, with 70 percent having openings they say are hard to fill.
“Labor was the story of 2023 as supply chain issues have somewhat faded,” notes a Datassential report. “Even as talk of a recession lingers, the job market is still strong, and many foodservice locations cannot find enough workers or enough of the right kind of workers to be open the hours they want.
“Wages continue to increase, as do benefits and other employee perks. Automation will be tapped not necessarily to replace workers, but to make their jobs better and easier. The shift to more premade and convenience products is not likely to lose traction in the next few years.”
Other issues facing foodservice operations and vendors include extreme weather patterns, competition from supermarket to-go operations and food halls, and the risks of reputational damage from social media.
“Social media is so vibrant and strong that one bad meal can wipe out a future generation of customers,” says Harris Cutler, president and CEO of grower and distributor Race-West Company BB #:156704 in Clarks Summit, PA.
“Most [operators] are looking to see where they can save money, but really you need to think about where you can spend money so people return and give you good reviews.”
Reputation is even more important for newer entrants into the market.
“New players are struggling to develop a name and reputation,” Cutler says. “People don’t want to take chances—with the high cost of a meal, they want to hear that it’s outstanding before trying it themselves.”
Buyers and Sellers
Surging costs and other challenges have also led to significant merger and acquisition activity in the foodservice industry.
“There continues to be consolidation on the distributor side,” says Rachel Atkinson-Leach, vice president of brand and category excellence at RPE, LLC, a shipper of potatoes and onions in Bancroft, WI, BB #:105471. “More of the major distributors are setting themselves up to cover larger geographical areas while acquiring the smaller players in the space.”
Examples include Raydia Food Group acquiring B&B Food Distributors, while US Foods announced the purchase of Tennessee-based IWC Food Service and Saladino’s Foodservice in California.
There’s also merger and buyout activity on the restaurant side. In 2023, Darden Restaurants bought Ruth’s Chris Steak House, FAT Brands acquired Smokey Bones, and Arby’s investor Roark Capital Group said it would buy Subway, for example.
This trend is expected to continue throughout this year, as British franchisee Hostmore purchased TGI Fridays, One Group Hospitality acquired Benihana, and a rash of other operators say they’re considering a sale.
Adding Value
Foodservice suppliers are adjusting their pricing, packaging, and products to meet the challenges faced by the industry. Many are offering their restaurant, retail, and institutional customers more value-added and fresh-cut fruits and vegetables—yet they must not only look great, but be reasonably priced.
“Although some operators are ordering lower-priced commodity items to reduce their food costs, persistent labor shortages are shifting demand to precut, value-added lines like Markon’s Ready-Set-Serve,” says Mark Shaw, vice president of operations at Markon Cooperative, Inc. {{BB #:123315}} in Salinas, CA.
“Value-added fresh fruits and vegetables save operators time and money that would have been spent on labor,” he notes. “These products solve many of today’s operator pain points.”
Such products can benefit operators with steady pricing and quantities, decreased food waste, and lower risk of cross-contamination in back-of-house kitchens, Shaw says.
“It’s important to work closely with our grower-suppliers to see how they’re setting themselves up for success during these inflationary, limited-labor times,” he adds.
Atkinson-Leach confirms suppliers are pressured to keep pricing as low as possible, especially on contracted commodities.
But she also sees this as an opportunity for ingredient producers and technology and equipment manufacturers to deliver solutions to foodservice operators with small kitchens and labor constraints, such as too few or unskilled workers.
Beal has a slightly different take.
“In the next 12 to 18 months, I think we’re going to continue to see an emphasis on customers looking for value, but not defined by less expensive products only. Customers want variety, quality, freshness, interesting flavor profiles, delightful packaging, and mindful portions to minimize waste.”
This is an excerpt from the feature story of the July-August issue of Produce Blueprints Magazine. To read the whole issue, click here.
