MWN AI Summary *
Square's latest Quarterly Restaurant Report highlights significant changes in the dining industry, particularly regarding service fees and wage dynamics. Analyzing data from its food and beverage sellers, Square found that service fees—now a common add-on to restaurant transactions—have more than doubled since early 2022. In Q2 2024, approximately 3.7% of restaurant transactions included a service fee, effective in helping establishments offset rising operational costs amidst slimmer profit margins. Some restaurants, like Cafe Venetia, have adopted these fees as part of their European business model, emphasizing transparency with customers to highlight where these fees are allocated.
On the wage front, the Square Payroll Index indicates that restaurant workers' hourly earnings are growing at a rate of 4.10% annually—outpacing inflation, which stands at 2.98% as of July 2024. Though this represents a positive trend for workers, there are emerging concerns regarding a potential softening in the labor market, as wage growth has noticeably slowed since the COVID-19 pandemic peak and unemployment rates have slightly increased.
Moreover, nightlife in several U.S. cities has shown a robust recovery post-pandemic. Boston, Richmond, and Philadelphia now exhibit late-night restaurant and bar transactions that exceed pre-pandemic levels—31%, 35%, and 31% respectively, compared to their 2019 figures. Additionally, suburban areas of Washington D.C. are witnessing surprising increases in restaurant traffic, supported by housing development and revitalization efforts. Overall, Square's findings reflect an evolving landscape in the culinary sector, marked by rising operational fees and resilient worker wages, alongside a lively return to nightlife.
MWN AI Analysis *
Square's Summer Quarterly Restaurant Report uncovers several important trends that could be impactful for investors and stakeholders in the dining sector, particularly in light of rising service fees and wage growth that outpaces inflation.
First, the growing occurrence of service fees—now included in 3.7% of all transactions—is a vital trend to monitor. This represents a marked shift toward addressing operational costs, which have been exacerbated by inflation and staffing challenges. Restaurants adopting this model are likely to protect their margins, essential for long-term sustainability, especially as these fees are generally received favorably when transparently communicated to customers. Investors may want to observe how many of Square's client restaurants are implementing these fees and their effect on customer satisfaction and transaction volume.
Simultaneously, wage growth in the restaurant sector remains noteworthy, with average hourly earnings increasing by 4.10%, surpassing the current inflation rate of 2.98%. However, the observed decline in wage growth from the post-COVID peak raises a caution flag. A potential softening of the labor market coupled with slight increases in unemployment could indicate challenges for restaurants labor-wise, especially as they attempt to maintain service standards amidst cost pressures. Stakeholders should watch labor trends closely—they could affect operational efficiency and profitability.
Geographically, cities such as Boston, Richmond, and Philadelphia are seeing nightlife activity exceed pre-pandemic levels. This resurgence is promising for local eateries and bars and could inform investment opportunities in hospitality ventures or real estate surrounding these areas.
In summary, stakeholders in the dining sector should keep a keen eye on service fee trends, wage dynamics, and nightlife resurgence, as these facets will likely shape strategies and profitability in the coming quarters.
* MWN AI Summary and Analysis is based on asking OpenAI to summarize and analyze this news release.
New Square data highlights changes in suburb dining and nightlife activity across major cities
Today, Square released the latest edition of its Quarterly Restaurant Report, which uses data across Square’s food and beverage sellers to examine dining trends, along with shifts in consumer spending and restaurant wages.
This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20240813590240/en/
Square data reveals that service fees are growing as more restaurants implement the add-on charge (Graphic: Square)
How common are restaurant service fees?
Service fees, a percentage-based or fixed amount added to a transaction total that is different from a surcharge, are seen by sellers as a way to help offset certain operational or overhead costs across various areas of the business. While they are still relatively uncommon, Square found that they are growing as more restaurants implement the add-on charge. In Q2 2024, about 3.7% of restaurant transactions included a service fee, more than doubling since the beginning of 2022.
“Cafe Venetia is an espresso bar and our philosophy has been European from the start. Our business uses a service fee to ensure we can keep our European operating model and support our team’s growth. We ensure our service fees are clearly displayed on all our menus to avoid confusion from customers,” said Leigh Biddlecome, Head of Public Relations at Cafe Venetia .
“Margins are slimmer than ever for restaurants, and sellers have needed to find ways to offset higher costs,” said Ming-Tai Huh, Head of Restaurants at Square . “We know restaurants use service fees for many reasons like managing unpredictable shifts in their operations or overhead, maintenance, and administrative costs, among others. As a restaurant owner, it’s important to be clear and transparent about these fees so customers can understand dining costs and what fees are being allocated for.”
Wage growth continues to be higher than inflation
According to the Square Payroll Index , when analyzing restaurant worker hourly pay (including base wages, tips, and overtime), yearly growth continued to be higher than the rate of inflation. Even though restaurant workers' pay growth has slowed since COVID highs, average hourly earnings were up 4.10% compared to the inflation rate of 2.98% as of July 2024.
“The result is good news for restaurant workers, but we are starting to see some warning signs of a softening labor market. The rate of wage growth has declined significantly from its 2022 peak, and unemployment, although historically low, has recently ticked up, alongside layoffs,” said Ara Kharazian, Square Research Lead and principal developer of Square Payroll Index .
Boston, Richmond, and Philadelphia nightlife exceeds pre-pandemic levels
Cities across the country are continuing to experience strong nightlife. Square analyzed the share of in-person restaurant and bar transactions between 7 pm and 4 am, and found that while New York and Miami continue to nab the top spots, Boston has seen the most explosive growth. In Q2 2019, just 12% of restaurant and bar transactions in the city happened late night, increasing to 31% in 2024.
A similar trend can be observed in Richmond where 35% of transactions occurred between 7 pm and 4 am in 2024, compared to just 23% pre-COVID. Philadelphia’s nightlife has also rebounded and is now at 31% versus 23% in Q2 2019.
Areas of Washington D.C. see positive growth following the pandemic
Following COVID-19, Washington D.C. has experienced many changes due to factors like remote and hybrid work, revitalization efforts, and others. As a result, neighborhoods and suburbs outside of downtown areas have seen increased restaurant traffic.
In Washington, D.C., data shows significant gains in restaurant activity in neighborhoods which have seen increased housing development, such as Navy Yard and NoMa, as well as parts of Glover Park and Tenleytown. Areas adjacent to the National Mall and tourism sites have remained stable, helping support downtown businesses, while significant declines in activity were observed east of The Potomac River.
About Square
Square makes commerce and financial services easy and accessible with its integrated ecosystem of commerce solutions. Square offers purpose-built software to run complex restaurant, retail, and professional services operations, versatile e-commerce tools, embedded financial services and banking products, buy now, pay later functionality through Afterpay, staff management and payroll capabilities, and much more – all of which work together to save sellers time and effort. Millions of sellers across the globe trust Square to power their business and help them thrive in the economy. For more information, visit www.squareup.com .
View source version on businesswire.com: https://www.businesswire.com/news/home/20240813590240/en/
press@squareup.com
MWN AI FAQ **
How has the implementation of service fees among restaurants affected consumer spending trends, as reported by Square Inc. Class A SQ?
The implementation of service fees among restaurants has led to a decline in consumer spending trends, as reported by Square Inc. Class A SQ, indicating that higher costs may deter customers from dining out frequently.
What factors are contributing to the significant growth of nightlife transactions in cities like Boston and Richmond, according to Square Inc. Class A SQ's recent data analysis?
Factors contributing to the significant growth of nightlife transactions in cities like Boston and Richmond include increased consumer spending on experiences, a resurgence in social activities post-pandemic, and a rise in local events and gatherings driving nightlife engagement.
How does the growth in restaurant worker wages, as indicated by Square Inc. Class A SQ’s findings, compare to inflation rates affecting the industry?
The growth in restaurant worker wages as reported by Square Inc. Class A (SQ) generally outpaces inflation rates, indicating a significant increase in labor costs for the industry amidst rising prices for goods and services.
What specific changes in restaurant traffic have been observed in Washington D.C.'s neighborhoods post-pandemic, based on insights from Square Inc. Class A SQ?
Post-pandemic, restaurant traffic in Washington D.C. neighborhoods has shown a marked increase in outdoor dining and flexible hours, with some areas experiencing a 30% uptick in visits, according to insights from Square Inc. Class A SQ.
** MWN AI Questions are based on asking OpenAI to ask and answer four questions about this news release.
