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  • Writer's pictureThe San Juan Daily Star

Study: Price hikes necessary for nearly 94% of restaurants

By The Star Staff

Although the restaurant sector, an important economic engine affected by the pandemic, began 2022 facing extraordinary challenges, the industry is navigating the new environment with caution and renewed optimism, the Puerto Rico Restaurant Association (ASORE by its Spanish acronym) said Tuesday.

ASORE’s new president, businessman Mateo Cidre, shared the economic results of the industry according to the association’s most recent study.

“The past two years have been about reaction, not planning. Given this extraordinary situation, it is imperative to learn more about the current state of the restaurant industry, which has suffered so much from the ravages of the pandemic,” Cidre said. “It is also an opportune time to gauge merchants’ future prospects. Much has been said about the impact on the sector. With this report, we clearly see where we are and what the expectations are for the future.”

Among the outstanding data of the report prepared by economist Gustavo Vélez’s firm, Economic Intelligence, is that due to the latest executive orders issued in response to the COVID-19 pandemic, 55.3 percent of those interviewed indicated that they are operating below their normal hours.

Economic Intelligence surveyed 1,331 establishments, of which 53 are chains. The sample is representative of the industry as it takes into account businesses of all sizes, from single stores with fewer than three employees, to more mature businesses with multiple locations and hundreds of employees. It includes everything from coffee shops and quick service restaurants to bakeries and fine dining. With a confidence level of 95 percent and a percentage ratio of 40 percent, the margin of error for the survey was ±1.87 percent.

About 48.2 percent are open for fewer hours and/or days allowed, 2.7 percent are temporarily closed, 4.4 percent are only providing delivery or pickup and 44.6 percent are operating as permitted.

Compared to the fourth quarter of 2020, sales were lowered for 37.5 percent, remained the same for 26.7 percent and increased for 34.8 percent.

About 73.2 percent participated in the Payroll Protection Program in 2020 or 2021, while 52.7 percent depended on Small Business Administration Loans-Economic Injury Disaster Loans, 19.6 percent on the commonwealth government, and only 7.1 percent on aid from the municipality.

Operational adjustments were a key to maintaining business continuity. Some 85.7 percent of restaurants took orders over the phone, while 50 percent turned to delivery platforms like Uber Eats (32.1 percent), Doordash (23.2 percent), Dame un Bite (20.5 percent), Uva (17.8 percent) and others.

During the period from July to December 2021, some 74.1 percent had to increase prices as a measure to mitigate economic changes. Other measures undertaken by restaurants were reducing hours for employees (38.4 percent), reducing days of operations (36.6 percent), and operating only some segments (19.64 percent), among others.

The complicated environment of restaurants is compounded with public policy issues that directly impact the sector, including the issue of the minimum wage. According to the report, 71.42 percent of restaurants will be affected by an increase in the minimum wage. Many of the owner/operators anticipated being forced to raise prices (80.4 percent) or reduce employee hours (34.8 percent) to mitigate the impact of a higher minimum wage.

Some 93.75 percent of business owners have been forced to increase their prices in the last 12 months, while only 5.36 percent have not increased prices.

Employee shortage remains an ongoing issue for the industry, with 41 percent reporting a 15 to 30 percent employee shortage.

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