The national restaurant industry's somber mood hasn't reached the Arkansas food scene, as the metropolitan areas of the state continue to see the arrival of new restaurants.
Rolf Wilkin, president of Eureka Pizza, said restaurant owners at Wednesday's Arkansas Restaurant Association board meeting were optimistic about the future of the industry in the state. Wilkin is also a member of the board.
"Restaurants reflect consumer confidence," Wilkin said. "When the economy is doing well, people eat out."
Tax revenue from restaurants and hotels in the Little Rock metro area and in the northwest corner of the state are rising because of the increasing number of visitors to the state and the addition of new restaurants.
There were about 5,000 eating and drinking places in Arkansas in 2015, up nearly 6 percent in five years. Restaurant tax collections in Fayetteville increased about 7 percent in the first half of 2016, hitting $2.13 million. Bentonville's tax collection for hotel and restaurants increased 4.6 percent to $1.489 million in the same period.
Restaurants in other areas of the country, especially midpriced chains, are struggling to bolster their bottom lines as food prices at grocery stores fall and Americans turn to more diverse prepared-food options.
Brinker International, which operates Chili's and Maggiano's, is battling lower profits with menu price increases between 1.5 percent and 2 percent in 2017. Buffalo Wild Wings plans 3.5 percent price increases in company-owned restaurants, according to the company's quarterly earnings reports.
Traffic at U.S. fast-food restaurants fell 1 percent in the third quarter of 2016. It's the sector's first traffic decline in five years.
"Casual dining is really hurting," Wilkin said.
Low food prices at grocery stores is contributing to the bleak picture for restaurants. Food-at-home prices for the third quarter of 2016 were nearly 2 percent lower than the same time a year ago, according to U.S. Department of Agriculture data. Egg prices fell the most, dropping 35 percent after an earlier jump in price caused by a bird flu-related short supply in 2015. Beef, veal, dairy pork and poultry also posted large decreases.
But so far, low grocery prices aren't discouraging Arkansas restaurant owners.
Vince Schallenberg, owner of All Aboard in Little Rock, opened his restaurant in 2011 at the tail end of the recession.
"It's a very competitive industry," he said. "In the last two or three years, I've seen a general increase in the industry around here."
And while increasing incomes and a falling unemployment rate are generally good for restaurants, they do have an effect on one of the restaurant industry's biggest expenses -- labor. It means that employers need to hire at higher wages.
"During the recession, turnover was really low," Wilkin said. "Now everyone is hiring."
Since the start of the year, all minimum wage employees in Arkansas are being paid at least $8.50 an hour, part of legislation that implemented a gradual increase in the state's minimum wage starting in 2015. Of the people earning around the minimum wage in 2015, the highest percentage came from service jobs in the food industry, according to the Bureau of Labor Statistics.
Business on 01/12/2017