A survey released this week by the New Jersey Restaurant and Hospitality Association (NJRHA) reflects an industry still recovering from pandemic-related shutdowns and capacity limitations, while also dealing with labor challenges and soaring costs that are cutting into profits.

The report finds that 54% of New Jersey restaurant operators believe business conditions are worse than just three months ago. That follows a June survey by the National Restaurant Association that showed the highest level of pessimism since 2008.

According to the NJRHA, 83% of operators say their restaurant is less profitable than it was in 2019. That can be attributed to wholesale food price increases of 16.3% in the last 12 months, combined with a majority saying they are seeing higher costs than in 2019 for occupancy, utilities and other operating costs—while menu prices have only risen 7.6%.

“Consumers are watching prices rise faster in grocery stores than in restaurants, therefore see an increased value spending their food budget in restaurants,” said NJRHA President Dana Lancellotti. “However, inflation is still impacting the industry and is forcing operators to cut hours, change their menus, postpone expansions, and reduce third-party delivery.”

Another impending challenge for the industry is the bill coming due on pandemic loans.

During the first two years of COVID-19, 65% of restaurants took on new debt across a mix of government loans and/or disaster loans, and private-sector loans.

“For many operators who received EIDL [Economic Injury Disaster Loan] loans, the deferment period for payment will soon end and it will be an overwhelming challenge for a majority of them to begin repayment right now,” Lancellotti explained. “The National Restaurant Association data shows that, of the operators who have not begun loan repayment, only 23% say they will be able to make principal and interest payments. Another 46% expect to be able to pay the principal, but not 30 months of accrued interest.”

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Labor challenges also remain as restaurants attempt to staff up to pre-pandemic levels. The survey finds that 66% of New Jersey operators report not having enough employees to support customer demand, and 79% of operators plan to hire additional employees during the next six months.

Lancellotti says that they are facing the unique issue of hospitality being an in-person job.

“Unfortunately, our industry cannot take advantage of the growing work-from-home trend that other industries offer,” she said. “Hospitality is a face-to-face business.”

She remains optimistic, though, about the industry recouping its workforce since it’s built on that aforementioned hospitality, which requires hiring talented people to provide the highest levels of service.

“We know that many people have been reconsidering their careers recently, and we hope that they will look seriously at this industry,” said Lancellotti. “Restaurants have good-paying jobs available at every experience level for people from every background. And these jobs provide the skills necessary to be successful in any career, and in life.”

Despite the conditions operators are being forced to navigate, Lancellotti noted that they are still providing the best service possible to their patrons.

“Restaurant operators are masters at balancing adaptation and innovation to provide amazing service for their customers,” said Lancellotti. “While operators are more pessimistic about the economy, they aren’t letting that get in the way of serving great food, providing exceptional service, and creating a memorable experience.”