National Restaurant Association Releases 2021 Mid-Year State of the Restaurant Industry Update
Positive trends improve industry outlook; uncertainty and waning consumer confidence could impact long-term rebuilding
FOR IMMEDIATE RELEASE
Vanessa Sink, Media Relations Director, National Restaurant Association
Washington, D.C. (August 31, 2021) – Today, the National Restaurant Association released a mid-year supplement to the 2021 State of the Restaurant Industry Report, which illustrates the continued impact of the COVID-19 pandemic on the restaurant industry. The report provides an updated look at key indicators and trends influencing the industry’s recovery as of June/July 2021, including the current state of the economy, workforce, and food and beverage sales.
Key findings include:
“Faced with one of the most devastating and disruptive events of our lifetime, the restaurant industry has taken significant strides toward rebuilding over the first half of 2021,” said Tom Bené, President and CEO of the National Restaurant Association. “Consumer expectations around dining out have changed, and the industry is continually adapting to not only meet, but exceed, these expectations. Restaurant operators, along with their partners throughout the supply and distribution chain, remain focused on providing diners with a safe and enjoyable experience, amid rising food and labor costs and challenges related to the pandemic. Given these factors, our outlook through the end of the year is one of cautious optimism.”
Labor and Food Costs Remain Top Challenges
July marked the seventh consecutive month of staffing growth, translating to a net increase of 1.3 million jobs in the first half of 2021. Despite these increases, eating and drinking places remain nearly 1 million jobs or 8% below pre-pandemic employment levels. Operators also continue to grapple with higher input costs, with wholesale food prices increasing at their fastest rate in seven years.
Technology, Outdoor Dining, and Alcohol To-Go Are Here to Stay
The pandemic catalyzed many changes in the restaurant industry including the rapid consumer adoption of technology for online ordering, electronic payment, and order pickup. Consumers want to see restaurants continue incorporating technology and are keen to continue using outdoor dining. In 31 jurisdictions, thanks to approved legislation, consumers will be able to continue ordering alcoholic beverages with their takeout.
The Threat of Delta
In the first half of 2021 industry trends were positive, but there is still a long road ahead. A National Restaurant Association survey, conducted Aug. 13-15, found that the delta variant of COVID-19 threatens to reverse the gains made in the first six months of the year.
“The trends from the first half of the year are promising, but a lot of uncertainty remains in regard to the delta variant, consumer confidence, and ongoing labor challenges,” said Hudson Riehle, Senior Vice President of Research for the National Restaurant Association. “We expect restaurant pent-up demand will remain high in the coming months. However, in this state of flux, maintaining the availability of on-site dining with few capacity restrictions will be critical to keeping the overall sales momentum going forward, especially for full service operators.”
The National Restaurant Association will continue to monitor the effect of COVID-19 on the industry in the coming months and plans a full State of the Restaurant Industry Report in early 2022.
Click here to download the 2021 State of the Restaurant Industry Mid-Year Update, sponsored by Sage Intacct.
About the National Restaurant Association
Founded in 1919, the National Restaurant Association is the leading business association for the restaurant industry, which comprises 1 million restaurant and foodservice outlets and a workforce of 15.6 million employees. We represent the industry in Washington, D.C., and advocate on its behalf. We sponsor the industry's largest trade show (National Restaurant Association Show); leading food safety training and certification program (ServSafe); unique career-building high school program (the NRAEF's ProStart). For more information, visit Restaurant.org and find us on Twitter @WeRRestaurants, Facebook and YouTube.
The Circuit Court decision has been affirmed by the State of Oregon Court of Appeals
FOR IMMEDIATE RELEASE: August 19, 2021
Jason Brandt, President & CEO, ORLA
503.302.5060 | email@example.com
Wilsonville, OR– The importance of appropriately spending local tourism tax revenue was affirmed on August 11 by the State of Oregon Court of Appeals after a case brought forth by Bend lodging operators and the Oregon Restaurant & Lodging Association (ORLA) against the City of Bend. The original suit was argued on May 8, 2018, in Deschutes County Circuit Court with Judge Beth M. Bagley presiding. In the suit, the hospitality industry plaintiffs represented by Josh Newton of Karnopp Petersen LLP argued the City unlawfully redirected restricted Transient Lodging Tax (TLT) revenue, which state law required to be spent on tourism and tourism promotion. The court reasoned that a local ordinance passed in the City of Bend violated ORS 320.350 by decreasing the percentage of total local TLT revenues expended to fund tourism promotion from 35.4 percent to 31.2 percent.
“The affirmation by the Oregon Court of Appeals this month upholding the Deschutes County Circuit Court decision means strong protections remain in place for how local lodging tax dollars can be spent across Oregon,” said Jason Brandt, President & CEO of the Oregon Restaurant & Lodging Association. “Our goals remain the same which start with the importance of working with local administrators and elected leaders when disagreements arise. Filing a lawsuit against a local government partner is a last resort and we look forward to turning the page and focusing in on what we can do across Oregon to invest our limited local lodging tax dollars on promotional strategies proven to boost our state’s local tourism economies.”
The August 11 decision and details pertaining to the case can be found here.
In 2003, the Oregon State Legislature passed lodging tax reforms meant to protect a percentage of revenues for hospitality industry reinvestment. As a result of the reforms, lodging tax collections spent by local jurisdictions on tourism promotion and facilities were ‘locked in’ as a percentage based on what a jurisdiction had been spending or agreed to spend as of July 1, 2003. July 2, 2003 represented a new chapter in Oregon whereby any new increase in a local lodging tax rate or any newly established local lodging tax would have to be spent on tourism promotion or tourism related facilities with 70 percent of revenue collected. The remaining 30 percent can and is commonly spent however a local jurisdiction sees fit free of any restrictions. You can view a short video created by ORLA which works to explain local lodging tax restrictions here: https://bit.ly/TLTdefined.
“My firm and I are pleased with the decision by the Oregon Court of Appeals affirming Judge Bagley,” said Josh Newton, attorney for ORLA and the Bend lodging operators. “It is important that local governments abide by state law and honor their agreements with local business.”
For more information on the efforts of the Oregon Restaurant & Lodging Association please visit OregonRLA.org.
The Oregon Restaurant & Lodging Association is the leading business association for the foodservice and lodging industry in Oregon, which before COVID-19 provided over 180,000 paychecks to working Oregonians. The latest available data from the Oregon Employment Department shows current employment levels in the accommodations and foodservice industry totaling approximately 160,000 people as hospitality like many other industries faces the disruptions caused by COVID-19.
Commercial (Corporate) Activity Tax
[Update 8.14.21] - New Law Allows Fiscal Year Filing for CAT
SB 164 requires a business that files taxes on a fiscal year basis to file an additional short-form in Year One of the Corporate Activity Tax (CAT) to effectively true up their fiscal year tax filing to the calendar year tax filing requirement in CAT. Read more.
[Update 6.14.21] - Key dates and CAT forms from the Oregon Department of Revenue and the Corporate Activity Tax team
Key dates include*:
* The Oregon Legislature is currently considering changes that may impact these dates for some taxpayers. More details will be provided if those become law.”
CAT forms can be found on the Department of Revenue website forms page by scrolling down to Corporate Activity Tax or entering Corporate Activity Tax in the search block. Important online resources include a worksheet to help with estimating payments, registration and payment training, a list of frequently asked questions, and a series of short subject-specific instructional videos.
Taxpayers with questions about the CAT can email firstname.lastname@example.org or call 503-945-8005.
Relief options available to taxpayers negatively affected by the COVID-19 pandemic can be found on the agency’s tax relief options page. Information about tax relief available for those affected by wildfires is also available on the agency website.
Commercial Activity Tax (CAT)
The new Commercial Activity Tax is imposed only after a taxpayer exceeds $1 million of taxable commercial activity. Once they pass that threshold, the tax is $250 plus 0.57% on gross receipts greater than $1 million after subtractions. Proceeds of the tax are directed by statute to boost funding for public schools. The Department of Revenue's website includes a list of frequently asked questions (FAQs) for tax payers to better understand what the tax is and who is subject to the tax.
Latest Announcements & Updates:
Resources & Webinars to Help You Understand the CAT
The Commercial Activity Tax is complicated and calculating your potential tax can be confusing. Therefore, ORLA has created a CAT calculator example to help our members understand how to calculate the tax. This exercise is only meant to help you project what your tax liability could be; as always, be sure to consult your tax advisors.
ORLA hosted two members-only informational webinars on Nov. 19 and Dec. 3 that explained the new tax, the Department’s implementation plans and what you can expect as a business owner. Tax experts with accounting firm Moss Adams LLP in Portland also provided some best tax practices for the hospitality industry. ORLA members can access the slide deck from the presentation by logging into the Member Portal on ORLA's website and clicking the Resource Library.
FAQ: Can we include the CAT tax on our customers’ bill?
A. The legislation that established the CAT (Oregon Laws 2019, Chapters 122 and 579) does not specifically prohibit a business from passing on additional cost of the tax. If you do choose to add a new line item to the receipt, the line item itself still counts as “commercial activity” when determining your tax liability. Consult with an attorney or financial advisor before making any final decisions.
How the Commercial Activities Tax Came About
This was one of the 2019 Legislative Session bills having the biggest impact on businesses. ORLA was opposed to this bill as it raised taxes on commercial activity for businesses with gross revenues of over one million dollars. ORLA, along with others in the business community, was able to amend the original bill to include a deduction for labor or cost of goods sold. The association will work during the rule making session to ensure hospitality businesses will be able to include the tax increase on receipts so customers can see the impact of the tax.
Additional Information and Timeline for the CAT
DOR Sought Industry Input in CAT Rule Making
The Department of Revenue (DOR) held a series of town hall meetings across the state in September-October to seek input from business taxpayers about the administrative rules for Oregon’s new Commercial Activity Tax (CAT). Nearly 900 business taxpayers and tax professionals took part in these public forums or participated in video conferences and conference calls. More information is now available on the CAT page of DOR website.
If you have any questions, please email Greg Astley, Director of Government Affairs, at Astley@OregonRLA.org.
This is for general informational purposes only. The information is not, and should not be relied upon or regarded as, legal advice. Please consult with your legal advisors.
PRESS STATEMENT: August 11, 2021
Statewide Mask Mandate Must Prevent More Business Restrictions
Statement from President & CEO Jason Brandt:
We can’t overstate how exhausted the hospitality industry is from an unthinkable health crisis spanning 18 months and counting. A new statewide mask mandate taking effect in 2 days must not lead to any other statewide business regulations. The industry is nowhere near recovery and has a long road ahead after all statewide restrictions were officially lifted 42 days ago. ORLA will work directly with Oregon OSHA and will advocate for a focus on ensuring appropriate signage is in place at businesses in addition to their oversight role for employee safety.
For more information on the efforts of the Oregon Restaurant & Lodging Association please visit OregonRLA.org.
The Oregon Restaurant & Lodging Association is the leading business association for the foodservice and lodging industry in Oregon, which before COVID-19 provided over 180,000 paychecks to working Oregonians. The latest available data for May of 2021 from the Oregon Employment Department shows current employment levels in the accommodations and foodservice industry totaling 153,200 people.
Cooking with Ghosts
Guest Blog | Miller Nash LLP
Key Considerations for Virtual Restaurant Brand Deals
Though not an entirely new concept, pandemic-related shutdowns have hastened the growth of ghost kitchens and delivery-only virtual brands, opening up a new potential line of business for local restaurants looking to expand into the new world of app-driven purchases.
When talking about “ghost kitchens” – there are two primary types of venture to consider. The first involves a brick and mortar space (or food cart) that, through a licensing agreement with a virtual restaurant brand, handles fulfillment for the virtual brand out of its existing space, with its own staff and equipment, often in addition to operating its own brand. The second is a brick-and-mortar space that rents out a kitchen (or station within a kitchen) to restauranteurs. While the second form of “ghost kitchen” has its own set of unique legal considerations (including real estate and insurance issues), this article explores some of the key deal points to consider when entering into an arrangement for the first type of opportunity, the virtual-only brand deal.
General Considerations for Virtual Brand Licensing Deals
Over the past year, a variety of virtual brands have started offering local restaurants and food carts the opportunity to offer their delivery-focused concepts (for example, musician Mariah Carey’s cookie brand, and YouTube star MrBeast’s burger chain). In general, a virtual brand will provide recipes, certain know-how, and packaging/labels, together with a right to use the brand and fulfill orders in a given territory, and the brick-and-mortar restaurant or food cart will provide the facilities, equipment, staff, and ingredients to produce the actual orders as they come in. In addition to the basic division of responsibilities, other operational considerations include how revenue or fees are calculated and paid, what fulfillment platforms are to be used, the scope of the territory, and any promotional obligations of the parties.
Among other terms to be negotiated on the legal front, consider:
Intellectual Property Licensing Terms
Intellectual property is at the heart of any virtual brand deal–the logos, trademarks, and trade names of the brand are arguably its most valuable asset, not to mention proprietary recipes, processes, and know-how that may be used by the restaurant throughout the fulfillment process. While the virtual brand will have an obvious interest in ensuring a brand licensing agreement clearly protects the brand’s intellectual property, restaurants should also pay close attention to the intellectual property provisions of an agreement. At minimum, a restaurant needs to ensure it is granted a sufficient license to perform its obligations under the agreement, and should seek to get a representation from the brand that its marks do not infringe on the rights of third parties (in addition to indemnification in the event of a breach of that representation). Another point to consider is which party should own any improvements to the intellectual property (which may be particularly relevant if proprietary recipes are part of the licensed assets).
Particularly in the event of celebrity-driven virtual brands, note that your licensing agreement may ultimately be subject to a second licensing agreement further upstream giving a virtual dining company the right to use a celebrity’s name, image, likeness, and other rights. While this may ultimately not be a negotiable term, understand that your agreement may be terminable on short notice if those rights are no longer available for use.
Employment Considerations and Relationship of the Parties
Also essential to a virtual restaurant endeavor is clear definition of the relationship of the parties. Entering into a partnership or joint venture may have negative tax impacts and other legal implications, and in general, parties should enter into a virtual brand licensing agreement as independent contractors. For the protection of both parties, care should be taken to describe the employment relationship (or lack thereof) between the brand and the restaurant’s staff, who remain solely employed by the restaurant.
In some cases, virtual dining concepts may be executed as a franchisor/franchisee relationship, subjecting the parties to the unique and often complex bounds of franchise law. While you should work with an attorney on any virtual brand deal, be sure to consult an attorney with franchise-specific experience if you are asked to enter into a franchise agreement or have questions as to whether your arrangement is really a franchising relationship.
These are just a few of many considerations for restaurants to consider when negotiating “ghost kitchen”/virtual brand deals. After the forced growth of digital ordering during the recent stay-at-home era, delivery-only concepts are likely here to stay, presenting an exciting growth opportunity for restaurants with additional capacity to fulfill online orders. | Nic Mayne, Miller Nash LLP
Nic Mayne is a business attorney with Miller Nash LLP. A graduate of Harvard Law, Nic’s practice focuses on reviewing, drafting, and negotiating contracts for businesses and individuals (including restaurants and celebrity virtual dining start-ups), such as intellectual property licenses and assignments; marketing and advertising agreements; manufacturing, distribution and supply agreements; and governing documents for various entities and joint ventures. Nic also guides clients through the M&A process and investment offerings. Nic can be reached at email@example.com or 503.205.2336.
This guest blog was submitted by Miller Nash LLP. For more information on guest blog opportunities, contact Marla McColly, Business Development Director, Oregon Restaurant & Lodging Association.