Dive Brief:

• Nearly eight out of 10 operators are confident in their ability to survive beyond the pandemic, according to research from Quadrant Strategies, jointly commissioned in June by DoorDash and Uber Eats. This is a marked improvement compared to the peak of the pandemic last year, during which a majority (53%) of restaurants worried about their survival.
• Despite this optimism, more than 75% of restaurant operators are concerned about rising food costs and worker shortages. Increased cost of goods is the top concern for restaurant operators (43%), followed by employee shortages (35%), reduced demand due to COVID-19 (29%), employee wages/costs (24%) and rising minimum wage (23%).
• Several major restaurant brands, including Chipotle, have said that the labor shortage has resulted in menu hikes. Labor issues at foodservice suppliers, combined with strong diner demand, has also sparked product shortages at chains across the industry, including at Starbucks, Wendy's and Chipotle. 

Dive Insight:

Restaurants are scrambling to pivot their operations in a bid to offset high food costs and supply chain disruption. Wingstop, for example, launched a virtual brand focused on chicken thighs to counterbalance high wing prices.

Inflation is at play here too, with the annual inflation rate rising over 5% for the 12 months ended in May, according to the Labor Department, which is the fastest rate since 2008. Limited-service prices have risen 6% and full-service menu prices have climbed more than 4% since last year.

Despite those challenges, most restaurant operators (85%) believe they're in a better position now than they were before the pandemic hit, according to the Quadrant Strategies study. Those operators point to outdoor dining, alcohol delivery, streamlined menus and improved operations as the drivers behind their confidence. Sixty-six percent of restaurants that offer in-person dining have added outdoor facilities and a majority (79%) report outdoor dining has had a "very" or "somewhat" significant impact on revenues.

It comes as a bit of a surprise, however, that food costs and labor pressure have usurped restaurant concerns about delivery app fees. This issue ranked as the No. 9 (17%) out of 15 top concerns for restaurant operators, according to the Quadrant Strategies study. This could reflect the number of delivery fee caps that have been implemented across the country during the pandemic. Some cities, like San Francisco, are looking to make those caps permanent. It could also reflect that consumers have said they are willing to pay for such convenience. That's not to say aggregator fees aren't a major concern, however. In fact, restaurants have been scrambling to find alternatives to aggregators because of these fees, including adding native online ordering functionality.

Still, the labor, supply chain and correlating inflationary issues may continue to outweigh other restaurant issues in the near term. BTIG analyst Peter Saleh recently said the labor shortage issue isn't going away anytime soon.