Kevin O’Leary on Inflation’s Impact on the U.S. Restaurant Industry

Kevin O’Leary, chairman of O’Leary Ventures and a well-known star of Shark Tank, has recently provided his perspective on the severe effects of inflation on various U.S. markets, with a specific focus on the housing market for potential homeowners and renters. However, O’Leary has now turned his attention to another struggling sector: the American restaurant industry.

In a recent op-ed for the Daily Mail, O’Leary described inflation as a “virus” and attributed the current crisis in the fast-casual dining sector to the lingering aftereffects of the COVID-19 pandemic, which have caused significant price increases and changes in traditional work environments.

Supply Chain Disruptions and Rising Food Costs

O’Leary highlighted how supply chains, severely impacted by pandemic lockdowns, have not yet fully recovered. He noted a significant rise in food costs, particularly for proteins such as chicken, beef, and seafood, which have surged by 30 to 40 percent over the past three years. These increased costs are placing immense financial pressure on restaurants, which are struggling to maintain profitability.

Changes in Work Patterns

The shift to hybrid and remote work models in the post-pandemic era has led to reduced daytime foot traffic in restaurants, especially those located in urban areas. O’Leary pointed out that this reduction in customer volume has been catastrophic for restaurants that have invested heavily in brick-and-mortar locations. The high costs of these prime urban properties are no longer justifiable without the necessary customer base to support them.

Urban Eateries Facing Hardship

Urban restaurants have been particularly hard hit as their expensive leases are no longer supported by sufficient footfall. O’Leary warned that many establishments will be forced to declare bankruptcy, undergo significant restructuring, or relocate to more affordable areas. He cited the example of Red Lobster, which recently started closing numerous locations and auctioning off equipment before filing for Chapter 11 bankruptcy.

A Grim Outlook

O’Leary expressed a grim outlook for the future, suggesting that Red Lobster’s downfall could be the beginning of a broader trend. He emphasized that inflation is particularly damaging for average-income earners and that there is no clear indication of when, or if, prices will stabilize.

Kevin O’Leary’s insights paint a concerning picture of the U.S. restaurant industry, which continues to grapple with the fallout from the COVID-19 pandemic and persistent inflation. As supply chains remain disrupted and food costs soar, many restaurants face an uncertain future. O’Leary’s analysis underscores the need for strategic adjustments and perhaps a reevaluation of the traditional business models that have long dominated the industry.