The same issues that have kept a damper on the hospitality industry since the COVID-19 pandemic will keep the pressure on during 2023, particularly squeezing profits for the beleaguered restaurant sector.

Inflation pushed up costs across the board—food, beverages, and labor—in 2022, and that is likely to remain the pattern in 2023. Combined with continuing economic uncertainty and the need for new—or better—strategies to deal with the sector’s ongoing labor shortages, it will take tight management and smart investments for continuing viability in 2023.

Here’s what decision-makers need to know about the outlook, the opportunities, and the risks.

Pressures add up

Everything got more expensive in 2022, and with 95 percent of sales covering those costs, it’s no surprise that everyone’s scrambling to narrow the profit gap. It’s reflected in menu changes, as 90 percent of restaurants have raised prices, and offerings have changed due to rising costs and ingredient shortages.

And, of course, reduced hours are common, especially given continuing difficulties finding workers for the front and back of the house. Job growth has been uneven in 2022 but the trendline has been up. Still, inflation-driven minimum wage hikes are further shrinking profit margins—another pressure point for management.

In fact, the labor shortage may be one of the industry’s biggest continuing pain points in 2023, and while higher wages are part of the solution, there’s more to the solution than just money. 

Worker safety is one issue, especially in fast-food where the risk for on-the-job injuries is high: One study found 87 percent of fast-food workers are injured at least once a year, largely with cuts and burns; 78 percent are injured more frequently. It’s leading many restaurant groups to prioritize safety, while improving risk management measures and training. Monitoring hours can also help as overworked staff members are more at risk of costly accidents.

But restaurants can also up the ante through personalized benefits that are key to a quality employee experience. Personalized benefits are tailored to employees’ individual needs; they are integral to creating more loyal workers and a more attractive workplace. 

Protecting against risks

Even before the pandemic, tech investment was key to more efficient operations, and that’s just as true today. But expanding tech-based services like online delivery, point of sale systems and contactless payments have a downside in that they open the doors to cybercriminals. And some of the biggest names in quick service have been attacked. 

This risk will only intensify moving forward. Most major restaurant franchises require their franchisees to have some sort of cyber insurance in place. But securing coverage is difficult and costly—increasingly so as threats escalate. In fact, some expect the number of businesses unable to afford or denied coverage to double in 2023.

That makes it critical for companies to put stringent practices in place to ensure the security of their systems. These include cybersecurity audits (which should also be required of vendors), multifactor authentication, and employee training in recognizing leading risks, such as social engineering and ransomware. 

Another ever-present risk: liquor liability. Restaurant companies with liquor exposures can expect to pay as much as 20 percent more for insurance in 2023. It’s another front where worker training is critical. The better they are equipped to identify and act in response to alcohol-related risks, the better the company will be able to reduce liabilities.

Kimberly Gore is the National Practice Leader of HUB International’s Hospitality Specialty Practice. She has over 30 years’ experience in the insurance industry with a specialization in hospitality and tourism clients. Kim is responsible for a strategic approach to carrier relationships, specialization and best in class service to benefit each client. Kim is an active member of the insurance community serving as president of IIABHGC and as a board member for IIABSC and was awarded the South Carolina Young Agent of the year in 2010.   

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