New Report Shows Over 40% Of Small Restaurants Are Facing The Same Issue

After struggling to stay afloat through the pandemic's health risks, indoor dining bans, and various mandates for masks and social distancing, restaurants are now facing a new challenge just as business was beginning to return to normal: inflation. According to Alignable, 41% of U.S. restaurants couldn't make rent in May.

Some of that struggle is because, according to the same report, 52% of small businesses have experienced rent increases in the last six months, with 6% of those increases coming in May alone. Almost a third (32%) of those who reported raised rent said it has increased by at least 10%. 

While this trend is not exclusive to restaurants — Alignable reported that 33% of small businesses in the United States and 39% in Canada also struggled to make their rent payments in May, while the Washington Post noted that rent for U.S. housing increased by a record 11.3% during 2021 — it is hitting the dining industry particularly hard due to other factors, including consistently rising food prices.

Prices continue to climb

Rent increases aren't the only reason restaurants are struggling to pay their landlords as increasing food prices have impacted consumers around the world. Reuters attributes this record-setting food inflation to a combination of pandemic-related supply chain issues, damage to crops by extreme weather, hoarding by producer nations due to post-covid shortage paranoia, and Russia's war on Ukraine, which has thrown the global markets for cereals, cooking oil, and fertilizer into chaos. According to NPR, in March 2022 wholesale food costs were 17% higher than they were at the same time the previous year. This makes purchasing supplies for restaurants difficult, especially as Alignable notes that nearly half of small businesses say their costs have increased more than 20%, but only 16% feel comfortable raising their prices by more than that.

This discomfort is well-founded. Even without higher menu prices, customers are already shying away from restaurants as they cope with their own newly strapped budgets. The consumer price index has risen 8.3% since April of 2021 (via Forbes), and 53% of Americans say they are planning on cutting back on dining out to save money, according to a CNBC poll. Already, Forbes reported a 9.4% decrease in restaurant traffic since April 2021, a trend it largely links to increased gas prices, which have been over $4 per gallon for three months with no sign of dropping. 

These gas hikes just represent another increased operational squeezing restaurants — especially those relying on deliveries — during this time.