Stats Of The Week
The State Of The Industry
Bars and fine dining experienced about a 90% sales loss since the beginning of the pandemic, according to Upserve’s State of the Restaurant Industry 2020 report. Since initial lockdowns, both of these segments have suffered the most compared to other food and beverage segments. Fine dining has recovered to declines of approximately 60% while bars remain down nearly 70%. Casual dining also experienced dramatic declines in March with sales volumes down by over 80% and has now recovered to declines of around 60%. The report showed the cities where the restaurant industry was most impacted by the pandemic include San Francisco, New Orleans, and Boston. The Northeast region of the country has been hit the hardest with major cities experiencing year-over-year sales losses of more than 65%.
Analysts Predict A Less Dire Forecast For Restaurants
Market analysts, Mark Kalinowski and Peter Saleh, recently issued reports that aim to project how hard the restaurant industry will be hit by the impact of the pandemic. With recent updates on expected restaurant closures looming, both analysts agree independent restaurants have been impacted the most compared to other segments. According to their calculations, the analysts predict mom-and-pops would permanently close around 7.5% of their units in 2020. Also, smaller restaurant chains that rank in the top 500 will likely permanently close about 4% of their units this year. The report shows one of the most striking effects of closures is large brands closing underperforming restaurants. McDonald’s closed 200 of its units in Walmart centers and Dunkin’ Donuts closed 450 of their units in Speedway convenience stores.
“While we expect same-store sales to backtrack in November given the cold weather, virus resurgence, and lockdown restrictions in some markets, we don’t expect sales levels to fall below what is required to maintain positive cash flow. While we expect an elevated level of restaurant closures this year, we believe the figure will be in the high-single-digit range, far below dire forecasts of 30% or more closure rates that have circulated,” Saleh noted in a BTIG research report.
What’s Trending
Operators Question The Viability Of Ghost Kitchens
Ghost kitchens were becoming a popular concept towards the end of 2019, but with the pandemic shuttering dining rooms this year, their standing has skyrocketed. With many restaurants struggling to stay afloat, they have turned to ghost kitchen concepts that are known for their low overhead costs and accommodate the current climate of take out and delivery-focused markets. Some still question the effects ghost kitchens will have on the restaurant industry and worry what the future will hold. Many show concern that ghost kitchens will result in the disappearance of physical restaurants and take away the restaurant experience for customers. They also fear if restaurants dwindle that the community will also.
“I can see the appetite to sort of innovate in different models, but if we move away from those places of social gathering completely, we’re really looking at a fundamental change in the fabric of our communities. And the question is, what is that balance?” Sarah Crozier, communications director for small business advocacy group Main Street Alliance, said to Restaurant Business.
What Foodservice Establishments Will Look Like Next Year
With 2021 right around the corner, many restaurant brands are looking towards new concepts to drive sales during this unprecedented time. Creating a safe environment that also runs efficiently and engages customers is not an easy task especially for independents. Large chains including McDonald’s, Taco Bell, and Chipotle are investing in innovative digital channels for their drive-thru and curbside pickup services. They’re also catering to consumer demand for contactless and efficient off-premise experiences. Other chains such as Shake Shack are minimizing their dining rooms to provide more space for outdoor seating. It’s harder for independent restaurants to make such drastic changes to their establishments. Design experts predict that independents will incorporate forced air between seating areas and garage-style doors to help diners feel more comfortable while eating at their restaurant.
Operators Get Creative With Marketing To Generate Holiday Sales
Less traveling and less in-person shopping during the holiday season means restaurants will be experiencing less foot traffic than they’re typically used to at this time of year. As restaurants struggle to stay open, many are tapping into the holiday spirit to reign in customers and drive sales. The holiday season brings many opportunities for operators to get creative with menu items. For example, Starbucks creates seasonal beverages every year that have become extremely popular and helped them recover during the pandemic. Some restaurants are pivoting items they already offer and reworking them as gifts for the season. Dunkin’ Donuts started offering DIY Donut Kits at the beginning of the pandemic and is now marketing them as gifts for children during the winter.
"Everybody wants to get through winter and everybody needs to do good holiday business to make that work. People are going to ask, 'How are we going to make this special?' and restaurants will need to answer that question," Jim Williams, CEO of menu management firm MustHaveMenus said to Restaurant Dive.
Postmates Merges With Uber Eats
On Monday, Uber Eats completed its acquisition of Postmates in a $2.65 billion all-stock transaction. This business deal has made Uber the second-largest food delivery provider in the U.S. behind DoorDash. The joining of these two companies has consolidated the food delivery industry under the three top players: Uber Eats, DoorDash, and Grubhub. Uber Eats and Postmates will still run as separate entities with their own apps and marketplaces but will combine their networks so restaurants that partner with Uber Eats will also become Postmates partners. Also, drivers will be able to obtain deliveries from both apps. In the new year, Uber and Postmates will begin integrating their services and will do a national “listening tour” to acquire feedback from partner merchants and learn about their needs.
“I'm confident that alongside Uber Eats we will create even more opportunities for our customers, continue to drive growth for our merchants, and deliver unique earning opportunities for our Postmates,” Bastian Lehmann, co-founder and CEO of Postmates, said in a statement.
Restaurants Pivot Operations For Holiday Party Season
This time of year typically includes large holiday parties which in turn brings in large revenue for restaurants. But, as with every circumstance in 2020, this time it’s different. Operators aren’t able to rely on the increased sales they’re used to during the holiday season and have to pivot their operations to accommodate the new normal. Some restaurants are turning to virtual events so they can host corporate holiday parties, private social events, winter weddings, and other large gatherings. Other restaurants that have winterized their outdoor space are offering bookings for outdoor events with smaller parties that include family members or friends that are in the same “COVID bubble”. Instead of relying on large parties, some restaurants are amplifying their on-premise and off-premise operations by creating larger patios to offer more seating, creating new programs to engage customers, and upgrading their take out options with new menu items.
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Bright Spots In A COVID-19 World
Celebrity Chef Wins $1 Million For Restaurant Relief Fund
On the latest episode of “Who Wants To Be A Millionaire”, NY chef David Chang answered the final question correctly and became the first celebrity to win the big prize. Chang had pledged to donate his winnings to Houston chef Chris Shepherd’s Southern Smoke Foundation that created an Emergency Relief Fund for hospitality workers that have been impacted by COVID-19. Typical Southern Smokes grants are $2,000 which means that the $1 million contribution could potentially provide financial assistance to 500 individuals.
“The real issue isn’t about me or restaurants, but the people who work the restaurants and the fact that they don’t have a safety net. Unfortunately, a lot of the assistance is being bogged down by politics. We need to be helping the people in need,” Chang said in an interview with USA Today.
Locals Organize Gift Cards For Struggling Restaurants
When Susan Brown, a Kentucky resident, heard the news that in-person dining was suspended in her town, she knew she had to do something. Along with Lyon County Judge Executive Wade White and other locals, they organized a fundraiser to give restaurant workers at seven different restaurants gift cards of $150 each. White said to WPSD Local that though he is unable to control state restrictions, he can still help his community in other ways. White believes during the holiday season these gift cards will help restaurant workers during tough times but it’s not the complete solution.
"This is a season of giving, and in the spirit of the Thanksgiving holiday and Christmas holiday, we need to do this for the families," Brown said to WPSD Local.
Quote Of Hope
“I want to raise awareness for the restaurant industry. I was like, man, I want the world to see just what people in the industry could do,” - David Chang, the founder of Momofuku and host of "Ugly Delicious"
