Companies Remaining Profitable during the COVID-19 Shutdown (And How They’re Doing It)
Each day of the COVID-19 pandemic seems to bring more bad news for restaurants. Early year income projections estimated the restaurant industry could eclipse $1 Trillion in sales for 2020. However, that forecast was recently revised by Moody’s to include a 20 percent sales slump.
As if the projections aren’t bad enough, restaurant industry lobbyists were recently on Capitol Hill asking President Trump’s administration for a $145 Billion recovery fund to help small businesses retain employees. The National Restaurant Association predicts industry-wide layoffs could surpass 7 million within the next three months if a stimulus package isn’t delivered soon.
But, not all is burning in Food World. In fact, some companies have found ways to profit during the pandemic.
Before anyone chastises these companies for turning a profit during a bleak period in history, remember that not all profits are bad. Ill-gotten profits? Sure. But, these companies are living examples of what the restaurant industry will look like very soon.
Let’s take a peek at how these companies managed to outperform their competitors.
Pizza delivery is certainly not a new restaurant industry trend. However, Domino’s Pizza revolutionized the approach to pizza delivery with Dominos DXP, a car containing a built-in warming compartment, and its recently unveiled self-driving delivery vehicle.
But, why do these vehicles matter? How are they part of the restaurant industry future? For starters, the DXP can save delivery drivers thousands of dollars in out-of-pocket costs for gas and car maintenance. According to the 2019 Global Trends Report, which focuses on what employees look for in a job, 82 percent of surveyed employees want to work for a company that gives the tools they need to work efficiently. Furthermore, in the era of social distancing, there is no safer way to deliver food than in a self-driving vehicle.
In all, Domino’s raised its quarterly revenue projection by 3.4 percent while the restaurant industry itself is experiencing a severe revenue crunch. The company recently announced it needs approximately 10,000 more employees to fulfil its increasing demand as well. I’d say that little car is going to take this company a long way.
While figuring out a sustainable business model has been a challenge, the importance of third-party delivery services and increasing to-go sales has never been more pronounced. Now, service providers like GrubHub are proving that during this pandemic restaurants need them more than ever.
While many cities are on lockdown, companies like GrubHub offer customers access to their favorite restaurants. They also provide a much-needed lifeline for local businesses suffering from the sharp decline in foot traffic.
Similarly, GubHub’s investors can expect a 60 percent increase in stock price from the company’s recent success during the pandemic, according to estimates by CNN Business.
One concern among many restaurant goers is coming into close contact with workers and delivery drivers while picking up to-go orders or ordering takeout.
Yelp, the popular business directory service, figured out a way to get around this problem by offering contactless delivery for many restaurants through its app. This feature allows customers to enjoy their favorite foods while practicing social distancing.
Furthermore, Yelp pledged to donate over $25 million to restaurants affected by the pandemic.
Investors may not see the return on investment in the first quarter of 2020 with Yelp projecting to miss its earnings by $.02 per share. However, the company increased its earnings projections for the rest of 2020, partly due to increased traffic to its app from its contactless delivery services.
Blue Apron provides customers with healthy ingredients to cook meals together while many people around the US are living under shelter-in-place orders. Those who are too sick to leave their homes to purchase items at the grocery store benefit the most from their services.
While many savvy investors may see a company whose stock has plummeted since its Initial Public Offering, customers are seeing huge returns from Blue Apron. The company has found a way to monetize family time, and provide its customers with a truly unique experience since it’s created entirely inside the comfort of its customer’s homes.
What can other restaurants learn from Blue Apron? Many restaurants are trying to emulate this business model as a new source of income during the pandemic. I’ve seen high-end restaurants in my area selling at-home kits to make some of their favorite (and perhaps simpler) dishes.
Another food delivery company making headlines during the coronavirus pandemic is Waitr Holdings. Though not as recognizable as Postmates or GrubHub, Waitr provides both businesses and customers a necessary service. Businesses don’t have to rely on gift card and to-go sales and customers can still eat their favorite foods while practicing social distancing.
One key difference between Waitr and its competitors is that Waitr focuses primarily on cities in America’s heartland. GrubHub, UberEats and Postmates tend to thrive in large metropolitan areas, on the other hand.
Knowing where your customers are located is a key to success. Reaching out beyond your target market before your business is ready is a surefire road toward disaster. It’s this business model that’s helped Waitr increase its revenue by 103 percent since 2018, according to its 2019 Q4 earnings report. Customers and clients alike can expect big things from this business in the near future.
Detroit Wing Company
A little-known chicken join in Detroit is making headlines because the business increased its sales and average ticket price during the pandemic.
How did that happen? According to the business owner Gus Malliaras, the secret was in his business model. Detroit Wing Company is primarily a carryout business, and so even though his ticket count is down 30 percent, his average ticket price is up 50 percent because customers are coming in to buy for more people at a time.
While many business owners believe their restaurants are recession-proof, Malliaras showed his local food scene that restaurants don’t need to focus on feeding customers in dining rooms to be successful.