'Bar Rescue' host Jon Taffer says restaurants 'fighting reinvention' of business

Inflation, employee shortages continue to hurt restaurant industry which is up 8.2% according to January CPI report

After shutdowns required restaurants to close their doors for in-person dining and forced many small businesses to close altogether, the industry is once again booming despite crippling inflation and economic fears.

Entrepreneur and "Bar Rescue" host Jon Taffer argueS that despite rising profits and steady customer visits, restaurants are embroiled in a new post-pandemic battle.

"We're really fighting this reinvention of our business," Taffer said on "Cavuto: Coast to Coast" Thursday. 

Customers have continued to flow into restaurants, keeping the demand high. The January consumer spending data found that food services and drinking places accounted for the biggest gain, with sales surging 7.2% last month.


Many restaurants, however, cannot keep up with the demand and make the necessary adjustments due to inflation and employee shortages.

"Revenues are up about 20% over pre-pandemic levels, which is fantastic. But we don't have the employees," Taffer said. "We're fighting with prices. Also, we're not getting the same spec, meaning a chicken breast comes in a different size each time."

"But that's not a small matter," Taffer continued. "Now, it doesn't fit on a bun properly. It takes longer to cook. They don't know how to cook it. These things really changed the way we operate."

"We're really fighting this reinvention of our business." Jon Taffer

As of January, half of the restaurant operators in the U.S. expect to make less profit in the new year, according to a recent report from the National Restaurant Association. 

The National Restaurant Association Business Conditions survey underscored how "the trifecta of higher food costs, labor costs and energy/utility costs" remains a significant challenge for a majority of operations, which already run on thin margins. 

"The restaurant operator is in a box," Taffer explained, noting the pressure inflation is putting on business owners. "If I can sell a $12 hamburger, but I can't sell an $18 hamburger because my market won't allow it, then I can't charge $18. I have to reduce the size of the burger. So I have a choice, either I raise my prices or I adjust my product to match the price point that I'm at now. A lot of restaurants can't elevate that price point. Their elasticity only goes so far. So it's a challenge."


Data from the National Restaurant Association Business Conditions survey showed that almost 90% of restaurants have already increased menu prices. Fifty-nine percent have changed food and beverage items offered on their menus and 48% have reduced their hours of operation. Just over 30% closed have closed on days when they are normally open and another 19% postponed hiring plans even. 

While Taffer observed the restaurants have a price problem, he did note that in many cases dining at restaurants as compared to buying groceries offers a "good value."

The Bureau of Labor Statistics' monthly consumer price index (CPI) report for January released last week showed that prices for food at home – the classification for food bought at the store to be prepared at home – were up 11.3% compared to last year. 

In contrast, the CPI data reported that "food away from home" is only up 8.2%. 

"Now a restaurant is still going to cost you more for the hamburger than the raw meat would be," Taffer said. "But from a value perception standpoint, restaurants are offering a good value today."

In addition to inflation, restaurants are fighting a battle against employees and potential employees, which Taffer warns has the ability to cost restaurants customers and sales. 

"We used to define the standards, and they would perform up to those standards. Now we find ourselves reducing those standards to match the employees we can find," he said, "That's scary. That's a formula for failure."

Employers added 517,000 jobs in January, the Labor Department said in its monthly payroll report released last Friday, easily topping the 185,000 jobs forecast by Refinitiv economists. It marked the best month for job creation since July.

The unemployment rate, meanwhile, unexpectedly dropped to 3.4%, the lowest level since 1969. 

Bars and restaurants accounted for the bulk of those gains, adding 98,600 workers in January.

Despite positive growth, Taffer noted employers are still struggling to hire and hold onto employees which he attributed to an industry "tentativeness."

"The big thing I believe that's impacting us the most is this tentativeness," Taffer said. "There's a hesitancy in all small business operators I see, because of the economic environment we're in, the human resource environment that we're in today."


"They're scared to commit to marketing plans, they're scared to commit to promotions, they're scared of their employees. We can't have turnover. We can't keep the employees that we have. There's this general fear, this tentativeness out there," he added. 

"So even though the restaurants are packed, we're not seizing the opportunity like we should."

FOX Business' Daniella Genovese, Megan Henney and Eric Revell contributed to this report.