State of the Restaurant Industry 2022: The future

What’s next for 2023?


6 minute read

Key takeaways

  • U.S. consumer demand has held up this year, though the economy is likely headed toward a mild recession in early 2023
  • Food prices remain high, but the price of groceries is outpacing that of food away from home, making restaurants a better deal for consumers
  • There is a widespread new appreciation for restaurants, an encouraging sign for the future

Although the outlook remains murky for the restaurant industry into 2023, there are a few positive signs: Chicken and beef prices have been heading down, although the impact of a lengthy war in Ukraine still hovers over future food supplies and prices. Additionally, during the summer, the price of food at home (grocery stores) increased at a higher rate than the price of food away from home (restaurants), and that widening price gap makes restaurant meals a better deal for many consumers.


Two signposts, one with an arrow pointing down, the other with an arrow pointing up.


The declining price of gas at the pump should also bode well for consumer confidence and people’s comfort level with spending money to eat out, given the correlation in 2022 between gas prices and restaurant sales. However, as we move into a likely recession in 2023, this could again negatively affect restaurants.


Meanwhile, labor challenges for restaurant operators should ease. With the end of federal stimulus payments and a high cost of living, more people who may have been on the sidelines will need to return to work. 

“There are going to be more people coming back to the workforce, and that natural return to work will be the story of next year.”

When it comes to efficiencies, operators have addressed the cost structure of their businesses, closed underperforming units, streamlined operations, simplified menus, and built out digital capabilities that cater to today’s customers. Demographic trends also favor restaurants. Gen Z’ers, in particular, “really like restaurants and the experiences they offer, are willing to and sometimes prefer to eat food at home, and are willing to pay for it,” vice chairman of investment banking for BofA Securities, Roger Matthews says.


The pandemic-induced shakeout will inevitably mean openings for good operators. “Restaurants that didn’t have the capacity to get through COVID are gone,” Lynch says. “The landscape is fresh for reforestation.” Overall, there’s a sense that, post-pandemic, consumers have come away with a greater appreciation for restaurants and for the experience of eating out.


A whiteboard and pen.


From a big-picture perspective, BofA Global Research economists say, “The broad outlook is that the labor market is still strong and consumer demand has held up. Headline inflation appears to have peaked. Food inflation remains a problem, but the drop in gas prices from their summer highs has been a pretty significant tailwind.” BofA Global Research economists expect a recession to begin in early 2023 but say it will be “probably quite mild, not particularly bad by historical standards.”


Although Bank of America’s experts remain wary of predictions, everyone is in agreement that the market is overdue to return to normal conditions, and there will be great opportunities when it does begin to turn.


Says Matthews, “We need better visibility before the investment market returns to normal. We’d need to see the labor market weakening a bit, a key piece to inflation getting under control. Food and wage inflation easing would make it easier for buyers and sellers to agree on the margin snapshot. I’m hopeful we will see this in 2023.”


Still, Short says, “People are gearing up to take advantage of what’s happening. Folks that have capital are getting excited about finding some good deals. A lot of people with cash know that there are opportunities out there to pick up a good set of stores at a low price.”


Restaurant group head for Bank of America, Cristin O’Hara, concludes, “I’m hopeful about 2023 in the sense that it has to be better than 2022. We’ll have more information as we come to the close of the year; we’ll have a better handle on where the troughs are for brands, and whether we’ve hit bottom. And when we do figure that out, there will be opportunities going forward. Right now, there still are a lot of people sitting on the fence. But hopefully in 2023, we’ll get back to normal.”


Cristin O’Hara | Managing Director, Restaurant Group Head, Global Commercial Banking, Bank of America

Ted Lynch | Managing Director, Senior Relationship Manager, Global Commercial Banking, Bank of America

Roger Matthews | Managing Director, Vice Chairman of Investment Banking, Consumer and Retail Investment Banking, BofA Securities

James Short | Senior Vice President, Senior Relationship Manager, Global Commercial Banking, Bank of America