Inflation continues to impact consumers' discretionary income. To retain customers, restaurateurs must balance increasing costs while maintaining attractive pricing and menu value. Additionally, restaurateurs face challenges with controlling operating expenses, such as insurance costs.
In addition to pricing decisions, restaurants must prioritize exceptional customer service to attract and retain patrons through personalized experiences, staff training, loyalty programs, community engagement, and technology integration (e.g., mobile ordering and online reservations).
Inflation and supply chain disruptions are expected to affect food costs, making menu pricing more volatile. Furthermore, potential tariffs enacted on imported goods can significantly affect food prices and overall profitability. Restaurants may need to adjust their sourcing strategies or innovate to maintain profitability.
Improvements have been made to combat labor shortages. However, attracting and retaining talent remains critical for a successful year. Potential shifts in immigration policies, such as stricter visa restrictions or enforcement of labor laws, could exacerbate the industry’s labor shortage, leading to higher wages for available workers. Rising wages, better benefits, and improved work environments will be key to attracting and keeping employees.
Many states are introducing bills to eliminate the reduced minimum wage for tipped employees. Employers will be required to pay all employees the same base state minimum wage and eliminate the lower tipped wage. These bills would also increase the base state minimum wage. Labor costs would increase dramatically should these bills pass. Some states and municipalities have already passed such bills.
Restaurants are prime targets for data theft including PCI data and data used for customer personalization. Ransomware and email compromise (wire fraud) impacts continue to rise. Web and mobile applications are a common weak point and frequent attack targets. And let us not forget third-party vendor risks such as the NCR incident in 2023.
AI and automation pose restaurant risks and opportunities. Adopting AI-driven ordering systems, robotic kitchen assistants, and automation for front-of-house operations will accelerate. Restaurants must balance the benefits of efficiency with customer experience concerns.
As the bonus depreciation percentage continues to phase down each year, the Section 179 deduction and immediate expensing under the Tangible Property Regulations (TPR) have re-emerged as effective tax planning strategies. Cost segregation studies should also be evaluated to increase depreciation deductions.
Planning and executing a successful sale (or purchase) of a business requires proper analysis of organizational structures, tax exposures, transaction costs, tax modeling/mitigation, and more. The lifetime estate tax exemption is set to expire at the end of 2025. Significant wealth (including business interests) requires careful tax planning for transitioning to the next generation.
As interest rates continue to be much higher than in recent years, access to capital remains a challenge for future organic growth and acquisitions. Even with M&A deals expected to increase, the cost will significantly increase.