Interior of a restaurant.
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On January 21, 2020, the CDC publicly confirmed the first known case of coronavirus in the U.S. It's been one rocky ride since.

Two Years Into COVID, Full-Service Restaurants Scrap for Survival

The pandemic has turned the sit-down sector into a battle of the resilient. The No. 1 challenge still on the table? Rising costs.

Within days of the pandemic’s unraveling, COVID-19’s effect on restaurants materialized in a way that’s never wavered—a lack of uniformity. According to a recent survey from the National Restaurant Association (collected in early to mid-January), 88 percent of operators reported a decline in customer demand for indoor dining thanks to the Omicron variant. More than three quarters of respondents said business conditions today were worse than three months ago.

Meanwhile, McDonald’s systemwide sales rose 21 percent to more than $112 billion last year—a record for the fast-food giant. Domestic same-store sales upped 13.8 percent, year-over-year, and McDonald’s plans to spend $2.2–$2.4 billion in 2022, with about 40 percent allocated to its U.S. business. Globally, the chain expects to open 1,800 restaurants (gross) and achieve net new unit expansion of about 3.5 percent, which would mark the best figure for McDonald’s in more than 20 years, per financial analysis firm BTIG.

Even with soaring labor and commodity costs, and supply chain and inflationary pressures aplenty, large and well-capitalized brands are turning this juncture into a chance to grab share from smaller restaurants and independents. In that same data pull from the Association, 63 percent of operators said sales volumes in 2021 were lower than 2019, and 73 percent reported softer traffic in 2021 than two years prior. Just 25 percent witnessed better same-store sales between 2019 and 2021, and 18 percent noticed a lift in traffic.

The most visible roadblock: 83 percent claimed total costs were higher in December than the year-ago period. And that’s unlikely to subside.

“Due to the timing and length of purchasing contracts and hedging practices, much of the substantial 2021 commodity price increases—beef plus 20 percent, sugar plus 50 percent, and wheat plus 32 percent, to name a few—will be borne by restaurants and consumers in 2022,” Maria Castroviejo, senior analyst—Consumer Foods at Rabobank, said in an email.

Akin to those early doomsday weeks, there’s a difference between surviving and weathering the storm that’s striking a significant divide today.

Major restaurant chains, which hold the largest traffic share at 77 percent, grew online and physical visits by 7 percent in the year ending December 2021, compared to the same period a year ago, according to The NPD Group. That’s a 2 percent decline from 2019. Independents and small chains hiked online and physical traffic by 12 and 13 percent, respectively, in 2021 versus 2020. But the growth remains 9 percent under 2019 figures.

According to consultant and strategist Aaron Allen, the median revenue change for U.S. publicly traded restaurants was negative 8 percent, year-over-year, as of January 2022. The gap between the top performers and the industry median, however, he said, remains “outstanding,” with the top-quartile growing at an 11 percent rate (or higher).

COVID has been a consistent tale of divergence.

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The labor challenge remains ever-present.

Service challenges and the labor divide

As of November, according to Black Box Intelligence, restaurants were operating with fewer employees per location than they did back in 2019, with the biggest canyons in front-of-house positions in full-service. And while brands are trying not to “just hire a warm body,” the lack of available staff has forced many to piece together inexperienced staffs.

The percentage of all hourly employees 18-years-old or younger increased for both limited-service and full-service restaurants, Black Box said. The increase was more than twice as large among limited-service brands. Still, given the size of these segments, particularly quick service, this shift means the industry is now employing hundreds of thousands more of these young teenagers than it did in late 2020.

Historically high turnover rates dropped the average tenure of employees. For hourly workers in limited and full service, it decreased by more than two years in the 12 months between October of 2020 and 2021, per Black Box. The decline was the same for front-of-house and back-of-house employees in full-service brands.

The notion of running a restaurant today, with elevated demand and off-premises business joining the equation, yet with fewer employees, is an expensive and complex Band-Aid. It’s generally accepted restaurants need one server per shift for every 12 customers and four back-of-house workers for every 50 diners in self-service restaurants. For seated casual dining, it’s one server for five to six tables per shift and four back-of-house staff per 50 tables.

This impact of limited staffing, or failure to meet those past marks, is showing clear in guest sentiment data from Black Box. Satisfaction with service speed is down 4.2 percent, with staffing being a common area of concern.

All of this is why it’s becoming far more ubiquitous to see quick-serves reveal prototypes with little (or no) seating, drive-thru-only models and order-ahead windows, pickup shelving, omnichannel sites with cubbies, curbside spots, and smart technology, and even full-serves bolting on drive-thrus.

Again, the line in performance comes from these modes of access: quick-service online and physical visits, representing 82 percent of all orders in 2021, increased by 7 percent in the year ending December 2021 compared to the same period in 2020, and traffic was down 1 percent versus 2019, according to NPD. Full-service restaurant visits, or 18 percent of industry orders, grew by 18 percent last year over a 29 percent decline ending December 2020, and 16 percent below traffic in the year ending December 2019.

Drive-thru increased visits 4 percent in 2021 and holds the largest traffic share at 52 percent. Carryout was 37 percent of orders and upped 2 percent, year-over-year. Digital orders placed through an app or website jumped 13 percent last year versus a whopping 100 percent leap in 2022. Non-digital orders rose 8 percent in 2021 over a 19 percent decline the year before.

"The industry's recovery isn't going to be a straight line moving upward based on the nearly two years of the pandemic so far; it's going to be bumpy,” said David Portalatin, NPD food industry adviser and author of Eating Patterns in America. “That said, restaurant traffic should recover 98 percent of 2019 visits by the end of 2022."

Full-serves face a dichotomy in that off-premises growth. On one token, brands are appreciating gains outside the four walls much higher than what they would have targeted sans a pandemic. First Watch, in one example, recently saw off-premises weekly sales hold in the $8,000 per store range. Pre-crisis, it was less than $2,000.

In-store traffic, though, is where the recovery will have to keep unfolding. It’s where high-margin items, like alcohol and appetizers, help full-serves cover costs of occupancy and labor. Delivery doing so isn’t so straightforward. And from a less tangible angle, dine-in allows operators to differentiate as they always have—with experience and quality. Unlike quick service, technology needs to enhance this age-old reality more than replace it.

As COVID fast-tracked familiar trends in quick service, it turned the sit-down industry into a battle of the resilient.

The state of the full-service restaurant industry

POS and management system provide TouchBistro on Monday released its third-annual State of Full Service Restaurant Report to dive into the financial health of the category.

It cut a two-sided picture: 74 percent of full-service operators polled said they’ve managed to maintain or increase their sales during COVID. However, profit margins in 2021 declined to 10 percent compared to 12 percent in 2019. The culprit was rising costs, with inventory causing the greatest financial strain, followed by rent and labor.

Change in sales volume versus pre-pandemic


  • Increased: 35 percent
  • Remained the same: 39 percent
  • Decreased: 39 percent
  • Change: 9 percent


  • Increased: 39 percent
  • Remained the same: 37 percent
  • Decreased: 37 percent
  • Change: 11 percent

Fine dining

  • Increased: 24 percent
  • Remained the same: 49 percent
  • Decreased: 49 percent
  • Change: –4 percent

Family style

  • Increased: 30 percent
  • Remained the same: 41 percent
  • Decreased: 41 percent
  • Change: 2 percent

And now let’s dive deeper into profit margins.

Annual revenue and current profit margin versus seats in restaurant

120-plus seats


  • Mean annual revenue: $2,454,125
  • Percentage mean profit margin: 13 percent


  • Mean annual revenue: $1,698,864
  • Percentage mean profit margin: 14 percent

81–120 seats


  • Mean annual revenue: $1,821,721
  • Percentage mean profit margin: 11 percent


  • Mean annual revenue: $1,435,484
  • Percentage mean profit margin: 11 percent

41–80 seats


  • Mean annual revenue: $1,670,233
  • Percentage mean profit margin: 11 percent


  • Mean annual revenue: $1,223,958
  • Percentage mean profit margin: 10 percent

21–40 seats


  • Mean annual revenue: $1,229,665
  • Percentage mean profit margin: 10 percent


  • Mean annual revenue: $972,222
  • Percentage mean profit margin: 10 percent

Less than 20 seats


  • Mean annual revenue: $635,417
  • Percentage mean profit margin: 7 percent


  • Mean annual revenue: $500,000
  • Percentage mean profit margin: 10 percent


  • 2021 total mean revenue: $1,500,383
  • 2021 total mean profit margin: 10 percent

In terms of the costs at hand, 33 percent cited inventory as the top hurdle. Many noted the cost of implementing new health and safety measures, like PPE and upgraded HVAC systems, helped to wipe out revenue gains.

Thirty percent credited rent and labor, respectively. For fine dining and family style brands, labor costs topped the list, at 33 and 35 percent.

As a GM from a bar and grill in New York told TouchBistro, “The amount of money we had to spend on COVID safety protocols was just ridiculous. We had to install a whole new ventilation system, we had to spend all this money installing Plexiglas between seating, buy PPE equipment—we needed to get PPE funding.”

This is another corner of the COVID recovery journey where the gap between large chains and independents surfaces. To cover expenses and stay afloat during the pandemic’s lowest points, the majority of operators in the survey (54 percent) said they had to rely on their own savings. Thirty-percent of operators also turned to friends and family for additional support.

Thirty-eight percent asked banks/small businesses (down 9 percent from 2019), 21 percent looked to online lenders and SBA-guaranteed loans, 20 percent grants (up 9 percent from 2019), 9 percent crowdfunding, 18 percent from the Paycheck Protection Program, and 14 percent tapped Employee Retention Tax Credits.

In TouchBistro’s report, while reliance on government grants increased significantly compared to 2019, not all operators took advantage of these programs. Some noted loans would need to be paid back eventually and didn’t want to take on the additional financial burden, and instead decided to rely on their own personal savings.

Presently, the Association is pushing for more federal aid after close to half of restaurants didn’t receive a grant from the $28.6 billion RRF (the program received more than 370,000 applications asking for $76 billion last year, but more than 177,000 restaurants and bars came away empty-handed). In a letter to Congress sent in late January, the Association estimated more than 900,000 jobs were saved by the initial round of RRF grants and full replenishment would maintain more than 1.6 million positions. 

Ninety-six percent of recipients in the survey said the grant made staying in business more likely, and 92 percent said it helped pay expenses or debt accumulated since the start of COVID.

Ninety-four percent of respondents from restaurants that applied for the RRF but did not receive funding said a future grant would enable them to retain or hire back employees.

Speaking to the labor dilemma, 81 percent of operators in TouchBistro’s report said they reduced staff amid COVID.

  • Reduced staff: 81 percent
  • Most of them: 29 percent
  • A few of them: 24 percent
  • Half of them: 19 percent
  • All of them: 14 percent
  • None: 19 percent

An owner from an independent family style restaurant in San Francisco highlighted what’s become the more current challenge—trying to bring back workers who might not want to return. He noted 40 percent of the restaurant’s employees found other jobs. “They couldn’t hold their breath forever … hoping that I will open back up again,” the owner said.

What’s causing the labor shortage, 22 months later? That’s been a moving target, but here’s what restaurants had to say in the report:

  • Fear of enforcing COVID restrictions: 41 percent
  • Fear of working with the public due to COVID: 41 percent
  • Lack of skills: 35 percent
  • Competition from COVID benefits: 33 percent
  • Competition from other restaurants: 33 percent
  • Smaller labor pool: 32 percent
  • Lack of interest in the industry: 31 percent
  • Competition from other industries: 27 percent
  • High turnover: 25 percent

To highlight, compounding Black Box’s data around tenure, 35 percent of operators, as shown above, cited a lack of skilled labor available as a problem. This isn’t just a tight labor market anymore—it’s one that’s going to require shored-up training as much recruitment to gain ground.

The issue has flashed with servers and dishwashers in particular.

Number of staff shortages restaurants are experiencing

  • We are not short any positions: 19 percent
  • 1–2 positions: 19 percent
  • Over 15 positions: 1 percent
  • 11–15 positions: 4 percent
  • 7–10 positions: 12 percent
  • 5–6 positions: 19 percent
  • 3–4 positions: 26 percent

Shortage percentage by position

  • Servers: 30 percent
  • Dishwashers: 27 percent
  • Chefs: 22 percent
  • Bartenders: 19 percent
  • Managers: 18 percent
  • Hosts: 17 percent
  • Line cooks: 16 percent
  • Prep cooks: 13 percent
  • Not facing labor shortages: 23 percent

Not unlike marketing these days, restaurants have turned to social media to connect with prospective employees just as they are customers.

How restaurants find new employees

Social media

  • 2021: 49 percent
  • 2019: No data

Job Sites

  • 2021: 46 percent
  • 2019: 43 percent

Company website

  • 2021: 38 percent
  • 2019: 43 percent


  • 2021: 33 percent
  • 2019: 45 percent

In-store advertising

  • 2021: 32 percent
  • 2019: 42 percent

Job fairs

  • 2021: 29 percent
  • 2019: 31 percent

Headhunter/recruiter/employment agency

  • 2021: 19 percent
  • 2019: 26 percent

And restaurants are staying competitive by offering:


  • 2021: 57 percent
  • 2019: 55 percent


  • 2021: 54 percent
  • 2019: 61 percent

Professional development opportunities

  • 2021: 39 percent
  • 2019: 43 percent


  • 2021: 37 percent
  • 2019: 46 percent

Although benefits appear to have overtaken wages as a top recruitment strategy, it’s probably more a reflection of wider trends than a labor change of guard. Simply, it’s hard not to pay more than you used to in today’s climate.

But where is the ceiling? A third of operators in the study said they can only afford a 1–2 percent increase in minimum wage. In an effort to curb labor costs, operators continue to focus on productivity with current staff. Thirty-three percent said they reduced their hours of operators, but just 32 percent said they were focusing on retention as a way to keep labor costs down—a figure that’s 6 percent lower from 2019.

Methods for reducing labor costs:

Increase productivity

  • 2021: 44 percent
  • 2019: 49 percent

Reduce hours of operation

  • 2021: 33 percent
  • 2019: N/A

Increase staff retention

  • 2021: 32 percent
  • 2019: 38 percent

Create labor targets

  • 2021: 32 percent
  • 2019: 35 percent

Use restaurant scheduling software

  • 2021: 29 percent
  • 2019: 34 percent

Use POS sales data to predict scheduling needs

  • 2021: 23 percent
  • 2019: 36 percent

Crosstrain/repurpose staff

  • 2021: 19 percent
  • 2019: 40 percent

TouchBistro pegs the average cost of training a new employee at $3,178. Sixty-seven percent of operators said they spend more than $2,000 on training a new worker, up 2 percent since 2019.

Employee turnover rates by restaurant type

  • Brasserie/bistro/café: 15 percent
  • Bar/grill: 19 percent
  • Fine dining: 21 percent
  • Family style: 32 percent

More on the inventory problem

Nearly half (47 percent) of respondents said all or most of their suppliers increased prices during COVID. And among those that belonged to a restaurant group, three in five saw all or most of their suppliers’ prices jump.

“Our food costs went up like 30 percent during the pandemic and that was a combination of supply and costs of fuel going up,” an independent family style owner told TouchBistro.

In response, 36 percent of restaurants said they reduced the number of menu items offered. Although common, it wasn’t an easy pivot. “Everything you're cutting [affects] somebody who's looking forward to something,” a fine-dining operator in Chicago added. “Now I have to tell customers it's not available at this time and I don’t know when it’s going to be available.”

In all, 66 percent said they made changes to menu size amid pandemic conditions. Thirty percent added more items to go along with the 36 percent that pared down.

Adding items was often an off-premises shift as much as anything else. Full-serves learned quickly what could and couldn’t fit into the contactless world customers abruptly demanded.

Menu changes (average)

  • Added takeout/delivery options: 44 percent
  • Expanded takeout/delivery options: 42 percent
  • Added grocery/pantry items: 30 percent
  • Added a subscription service: 28 percent
  • Added meal kits: 28 percent
  • No change: 14 percent

TouchBustro research also found restaurants that experienced an increase in sales expanded offerings at a much more significant rate. Put another way, restaurants with extra cash coming in were more likely to use it to support a takeout-friendly business model.

Tech flows

On the tech side, contactless payment is one update that seems to have legs. While customers remain fluid on the service element, the payment game took a sharp turn.

Contactless payment types implemented

  • Mobile pay: 71 percent
  • QR codes: 70 percent
  • Tap to pay: 64 percent
  • None: 6 percent

Nearly three in five restaurants reported adding a new platform or implemented all online ordering platforms during or after the pandemic started. Ninety-five percent of restaurants said they were using one or more online ordering platforms. A third of restaurants said they tacked on some after dining rooms shuttered due to COVID.

Also, nearly half of restaurants noted customers are spending 11–20 percent more on online orders on average—due to both more menu items per check and more add-on options.

With a rise in a digital transaction universe, restaurants’ frustrations with third-party platforms persisted. Thirty-four percent of operators in the study said they now offer online ordering directly from their websites.

Regardless of the platform, though, operators are looking for additional features. Thirty-six percent said marketing and advertising tools were the No. 1 feature missing from their current online ordering platforms. Twenty-five percent picked delivery options; 22 percent “ability to integrate into POS;” and 17 percent “Dinner Discovery Platform.”

Loyalty programs also saw an uptick during the pandemic, with two in five operators implementing their platforms in the last one to two years. Now, more than half of all operators (57 percent) report having a loyalty or rewards program of some kind.

Most operators are taking a hybrid approach to reservations as well. While 61 percent of restaurants now use a reservation platform, the majority of reservations (62 percent) are still being made by phone or through walk-ins—a figure that’s up 5 percent from 2019.

“From social distancing measures to the rise of QR code menus, the way operators must now run restaurants has significantly changed since the onset of the pandemic,” says Samir Zabaneh, CEO of TouchBistro. “While our findings reveal just how much has changed since our 2020 report, they also show how resilient [full-service restaurants] have been throughout these extraordinary times. From managing an off-premise presence with online ordering platforms to navigating the labor shortage and keeping costs down, it’s clear from the emerging trends we are seeing that technology is at the heart of helping [full-service restaurants] not only survive but make gains during these extremely challenging times.”