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Inflation, a labor shortage and the delta variant of pressurized restaurants heading into fall, survey finds

County restaurants have been eagerly awaiting the economy to reopen in recent months, as Covid vaccines become widespread and pent-up consumer demand is palpable.

But headwinds from supply chain disruptions to a labor shortage and rising costs hit the industry as the contagious delta variant obscures hope for a return to normal.

Owners of small food, restaurant and hospitality businesses are more worried than most continued interruptions in pandemic operations, according to new data from the Goldman Sachs 10,000 Small Business Voices program. Data shows that 84% of owners in these industries are concerned about the impact of rising Covid-19 infection rates on businesses, compared to 75% of the overall small business population.

Almost all have seen an increase in operating costs, with 93% saying inflationary pressures have increased since June, which has had negative effects on finances.

The subset of the data for 117 restaurant, restaurant and hotel owners comes from a larger survey of 1,145 Goldman Sachs 10,000 small business participants earlier this month.

The numbers underscore the sustained pressure restaurants are facing, even in an economy that has rebounded from the worst damage inflicted by the coronavirus. As vaccine rollouts and looser public health restrictions have brought the industry closer to normality, challenges abound as restaurateurs look to fall.

Ruby Bugarin, who runs Margaritas and Pepe’s restaurants in the greater Los Angeles area, said product availability and higher costs have affected her businesses. Products like crab are harder to find, prices for chicken and pork have increased by more than $ 1 a pound, and prices for other products have skyrocketed.

“In the last two or three weeks, the price of avocados has gone from about $ 40 a case to $ 85 a case. So that’s more than double,” said Bugarin, a member of the Small Business Voices program. “We can’t do the same to our customers – we increase prices once or twice a year. “

Labor costs are also rising at its two restaurants, which together have 63 employees. Bugarin said she would like to add a cook or two to each location, but instead pays overtime each week to her current staff.

Labor issues have also hit owners of restaurants, eateries and hotels like Bugarin at higher rates than seen in the larger small business community. Data shows that 79% of those business owners say workforce issues have worsened since before the pandemic, up from 64% overall.

Recent data from the National Federation of Independent Businesses highlights the workforce issues weighing on small business optimism. Job vacancies were above the historic 48-year average in August for the second consecutive month.

“In June, 67% of small businesses, despite inflation, despite workforce challenges, said they believed the United States was going in the right direction,” said Joe Wall, Managing Director National Goldman Sachs 10,000 Small Businesses Voices. “That number is now 38%. The delta variant is for sure the # 1 theme in terms of why sentiment has changed and then you accumulate in it, the dynamics of inflation and the challenges of the workforce. ‘artwork.”

As the pandemic taxes restaurant owners, Goldman data has revealed that nearly 40% of restaurant and hospitality businesses say they expect to have to take out a loan or line of credit for their business this fall or this winter. This compares to 29% of businesses in general.

The Small Business Administration recently announced an overhaul of the Economic Disaster Lending Program for Businesses. The loan limit will increase to $ 2 million and recipients will be allowed to use the funds to prepay commercial debt, which would allow restaurants to spend money on commercial debt and more.

“At a time when there is still an dire need for small business restaurants to access working capital, these changes will improve the prospects for thousands of operators and improve the economic outlook for communities large and small,” said Sean Kennedy, Executive Vice President. policy officer at the National Restaurant Association, said in a statement. The group worked with the SBA on new conditions for small businesses.

Beyond these changes, owners and advocates of small businesses and restaurants have called on lawmakers to replenish the $ 28.6 billion Restaurant Revitalization Fund. It provided subsidies to the industry, but was quickly sold out due to high demand.

“We were able to disperse it to over 100,000 businesses across the country. However, the demand was 2.5 times that amount,” SBA administrator Isabel Guzman told CNBC last month of the RRF. “There are still restaurants, food and beverage companies that need support, we know they’ve been hit the hardest and will often be the last to reopen in communities, but they define so many of our main streets. However, I cannot comment specifically on what the actions of Congress will be, but the SBA would be prepared to administer these programs quickly, efficiently and fairly. “

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