USA | Lower foot traffic, scarce profitability and tip credit losses spiral the Michigan restaurant industry.
The Michigan Restaurant & Lodging Association (MRLA) has released the results of a recent hospitality industry operational survey it conducted covering topics of sales volume, customer traffic, staffing, and inflation.
The MRLA conducted this industry survey to gain a clear, data-based picture of the state of Michigan’s restaurant industry in 2024, four years after the onset of the COVID-19 pandemic, and further evaluate the impact of the loss of the tip credit.
“Michigan’s restaurant industry is in a far more precarious place than we had anticipated,” said Justin Winslow, President & CEO of the MRLA.
“The residual impact of the pandemic has had a long tail, particularly for independent, full-service restaurants, as protracted inflation and workforce challenges have made it exceedingly hard to sustain even a modest profit.”
The survey outlined the downward turn for restaurant sales, which has seen only one in four restaurants experiencing sales growth over the last year. Despite significant cost inflation driving up menu prices, 45 percent of restaurants have experienced decreased top-line sales over the last year.
More than 60 percent of restaurants have reported having less customer traffic than a year ago, 40 percent of restaurants are not currently profitable, and 55 percent of restaurants have operated with adequate staffing. Fifty-seven percent of operators have experienced workforce challenges is being impacted by an affordable housing shortage.
Michigan’s hospitality industry also awaits the result of a Michigan Supreme Court ruling that could increase the state’s minimum wage to about USD 14 per hour and eliminate the tip credit. In addition to state of the industry data, the operational survey also tracked the economic impact if Michigan eliminated the tip credit.
“If an adverse ruling from the Michigan Supreme Court later this summer requires the elimination of the tip credit, an industry on the edge will plunge headfirst into the abyss,” said Winslow.
“The Michigan legislature is in a position to implement a reasonable solution to prevent such a catastrophe, but we all need Democrats and Republicans to quickly work together in common cause. The alternative is a pandemic-level of restaurant closure and job loss, which will decimate Michigan’s second largest private employer, wreaking havoc on Michigan’s overall economy.”
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