Industry advocate: Despite pandemic recovery, Iowa restaurants struggle with costs

In 2021, long after state-mandated public health emergency closures had been lifted, restaurants in Iowa were still scrambling.

After 750 restaurants in the state were shuttered by the pandemic, those left open struggled with challenges that compounded in the wake of COVID-19’s arrival — labor shortages, volatile expenses and supply chain issues even as pent-up demand soared.

Now, three years since the pandemic first hit, how are restaurants in Iowa doing? Jessica Dunker, president and chief executive officer of the Iowa Restaurant Association, delivers the condition of the state for the restaurant industry.

Q: In August 2021, the restaurant industry was in a sober state but was still doing better than initially expected. What is the condition of the state of restaurants today, three years after the pandemic started?

A: Business is up, people are coming back to restaurants, and so foot traffic is up. Revenues are up. But costs are also up.

Yeah, people are coming out. Yes, they're ordering. Yes, they're spending. But the cost of goods and cost of labor are such that “I've never worked so hard for so little profit” is what we're hearing. So if you look at the numbers of the sales numbers, they look great. But at this point in time, the cost of goods is still significantly up.

From a labor perspective … kitchen staff is still really difficult to find for the back of the house. But we are starting to see an upward swing in front of the house. So I would say that we are steady and growing and hopeful.

Q: So the front-of-house positions have mostly recovered, but the back-of-house positions are still struggling. Why?

A: Part of the reason that I think the front of house … has been doing better is because we are seeing more restaurant owners, particularly in certain kinds of models, allow younger people to work than they used to.

In our industry, we've found a really good pool of 15-year-old workers. And that has been very helpful. I was just talking to someone who owns five quick-service restaurants in your area. Between his locations, (he has) almost 50 14- and 15-year-olds working for him right now. And they're really good workers.

That's helping some of those cashiering positions, those bussing positions, those front of the house positions.

Q: Legislation was recently passed to relax labor laws for minors. Are there any other changes the Iowa Restaurant Association is looking at that would benefit restaurants?

A: We think there's some inequity in that young people (with a minor school license) can drive to a school dance, but they can't drive to a job. So we're going to continue to push for that.

Especially in a certain segment, like quick-service, it would sure be nice if they could get themselves to and from work. We feel like there's less likely problems from driving to and from a job where you don't have a passenger. And that'll benefit grocery stores and swimming pools and whoever else is hiring young people. But that's one that did not (pass this session.)

Q: Which of your legislative priorities passed this year?

A: One was to allow 14- and 15-year-olds, instead of working until 7 p.m. during the school year and 9 p.m. during summer hours, (to work until) 9 p.m. during the school year and 11 p.m. during summer hours.

That's really helpful to us, because we were having to send these really effective workers who wanted to be there home right when things were getting busy.

Sixteen and 17-year-olds, under the passed legislation … will be able to take alcohol from the bar to a table, and they will be able to run a credit card or take money for alcohol.

We suggested, and (legislators) took the suggestion, that there should be parental consent on file. Another guardrail that’s put in there is that at least two adults need to be present working in the restaurant at that time. There’s some training that the kids will have to take related to recognizing and knowing how to deal with harassment.

Q: In 2021, you said that we had lost about 750 restaurants, which was slightly fewer than the prediction of 1,000. Where do those numbers stand today?

A: I think that we are close to recovery, because we have seen new businesses opening up. So, from a pure numbers standpoint, we would be back (at) over that 6,000 eating and drinking establishments across the state.

That being said, you're seeing a lot of different owners, because one of the things that is happening is that people took on a lot of debt during the pandemic, and they're having to find ways to service that debt. And so we're seeing the establishments change hands, we're seeing consolidation of restaurant groups.

Food prices are a big part of that. There’s almost no telling … what in the supply chain is going to become difficult. During the pandemic, people were really forgiving and understanding about menu prices increasing.

But there’s only so much you’re going to pay for a pizza, or a burger, or a great sandwich. We’re reaching that point.

Q: What pandemic changes do you think will become a permanent part of the dining landscape?

A: You are going to continue to see a service fee added for credit card use. We’re at the point where credit card fees for restaurants surpass the cost of their rent or mortgage. I think you’re going to see that become a permanent part of the landscape.

I think the sized-down menus are here to stay. I look at it in the model of a great Mexican restaurant, where they can have a pantry with fewer items because those items are shared across dishes. Restaurateurs across cuisine types are looking at that closely and seeing how they can leverage that.

You have QR code menus so you can change the menu (when) you can’t get product. That’s a trend I think we’ll continue to see for a while.

Many restaurants have permanently sized down dining within the restaurant. We’re still finding balance with third-party delivery companies, but consumers love it, so that’s here to stay.

Q: Are restaurants still in defense mode, or have they gone completely into the offensive with growth?

A: I think we're still trying to find our joy. Because so many people make a career in hospitality in large part because there's joy in it.

We've maintained that it was going to be five years for restaurant recovery and 10 years for hotel recovery in the state. I think we're on track for that.

Q: What are the most promising signals for the industry at this point?

A: That people still love to come out. The demand for what we do is strong, and it continues to be strong. Its strong regardless of what the economic factors are.

Consumer patterns change, but it’s not in the number of people that come through the doors. It’s the way they order when they get there.

Comments: (319) 398-8340; elijah.decious@thegazette.com