More than two years after the pandemic, consumers and restaurant operators are experiencing varying conditions by market with results that can only be described as uneven. At the height of the pandemic, some residents fled states based on a new ability to work from home and may have thought they were seeking short term refuge. Once in place, they never looked back. That’s reflected in shifting population data and restaurant sales. Another place it’s reflected is in the turnover of restaurants overall.
According to BizBuySell.com, restaurant for sale transactions rose steadily from Q4 2021 to Q2 2022 nationwide with restaurants changing hands at a rate 22.5 percent ahead of last year. The South accounted for 42.5 percent of all transactions, more than doubling the rate of units sold in the Pacific (20.8 percent) and Northeast (18.7 percent) regions. Selling prices also increased in the South. Over the last three fiscal quarters, restaurants’ average price in the South as also increased, from $198,000 to $202,000. What’s been driving this comeback? It could be the shift in population.
With people spending more time at home, it’s brought their cost of living closer to the forefront of their minds. The ongoing economic difficulties have resulted in people looking to save money wherever possible, including things like rent, energy costs, leases, and property taxes. This has resulted in many people moving to regions with better business markets and lower living expenses.
How significant is the shift in recent years? According to a recent report from the U.S. Census Bureau, the top 10 growing cities and towns from 2020-2021 were located in Texas, Arizona, Florida and Tennessee. These municipalities saw their populations grow from 5.4–10.5 percent. Meanwhile, towns and cities in Massachusetts, California, New Jersey and New York, as well as Washington D.C., have seen declining populations recently. From 2020–2021, population declines of 3–6.3 percent occurred in these states.
With the population shifting to the south and to the southwest, it’s taking the business it produces along with it. As restaurants have been making efforts to recover from the economic downturn, growing populations mean growing customer bases. According to online restaurant platform OpenTable.com, Florida saw the number of people dining out from July 2010–July 2022 increase by 30 percent in Miami, Fort Lauderdale, Naples, and Tampa. These four cities are among the top six growing cities in the country.
Contrast that with the number of daily diners reported by the same source in cities like Minneapolis where the counts are down 54.3 percent, San Francisco where daily diners have fallen 45.9 percent, or Portland, where diners decreased by 45.2 percent for the same period. That is more than a 70-point swing over the same period versus the cities in Florida cited above. Some restaurateurs are attributing lower dining counts in major cities like these to increased crime in their markets. This is tied to actions taken in the summer of 2020 to pull back police budgets in some urban areas. For the industry, it contributes to a recovery that is saw toothed at best, with some markets continuing to outperform others.
It’s not only the southeastern U.S. that’s been seeing this kind of growth in its restaurant markets. Southwestern states, such as Texas and Arizona, have seen increased restaurant patronage in 2022, according to OpenTable. Additionally, New Mexico is among the top five growing regions in the U.S. for restaurant growth, with a 7 percent increase in restaurant patronage from August 11–25. Nevada has also seen strong restaurant patronage as well; from mid-May through late August, nearly every day saw 100 percent of surveyed restaurants in the state accepting reservations.
An Industry Making a Comeback
Overall, the industry is experiencing recovery but clearly at an uneven pace. As the population “settles” and workers return to the office, there will be less flexibility available for families to relocate. At the same time, the “gig” economy is offering the flexibility for many workers to live anywhere and it’s clear many are not returning to traditional roles. The Bureau of Labor Statistics reported an August 2022 Labor Participation Rate (the proportion of the working-age population (16 and older) that is employed or looking for a job), that remains stubbornly stuck in the 60s (62.4 percent), where’s it’s been hovering for almost a year and half.
Many restaurant operators have recovered from the impact of the pandemic and are now solving for supply chain disruptions and inflation. For others, population shifts may hamper their recovery. Overall, it may come down to that adage from real estate. As the saying goes, “it’s all about location, location, location.”
Robin Gagnon is the CEO and Co-Founder of We Sell Restaurants, the nation’s largest restaurant brokerage firm and the only national franchise specializing in restaurant sales.
