Operations

Restaurant Spending is Up, But Recovery is Still Far Away

With vaccine distribution in high gear and Valentine’s Day fast approaching, customers across the country are returning to their favorite restaurants. It’s a good sign for restauranteurs who’ve had to endure nearly a year of skeletal operations. But, the industry still has a long way to go before it recovers, even as additional relief looms over the horizon.

Two data analytics firms released separate studies in December 2020 showing overall restaurant spending dipped just 1% in 2020 despite the challenges wrought by the COVID-19 pandemic. Spending varied widely with some states spending increasing year-over-year while others decreased significantly. In states like California, lower spending correlates with the state’s strict COVID-19 protocols for restaurants.

Other states such as Washington, Alaska, and South Dakota increased their restaurant spending by more than 20%. However, John Kelly, CEO of Zenreach, a company that conducted one of the studies, believes the trajectory of the pandemic will largely dictate customer spending for the next several months. Afterward, restaurants face an uphill battle to win back the trust of their customers.

“With the number of COVID-19 cases skyrocketing and with the return of more business restrictions, it’s clear we will not be out of the woods for a bit,” Kelly said in a statement.

“The difference, however, between this recent wave of closures and the ones which took place earlier in the year is that we now better understand the formula for getting through this challenging period,” he added.

In the spring of 2020, the Bureau of Labor Statistics found 32.5% of restaurant workers in the US were unemployed. By the fall, industry analysts at Yelp calculated that COVID-19 had forced over 97,000 small businesses to permanently close. Overall, 2.5 million jobs were lost, wiping away six years of growth, according to CNBC.

With yesterday’s learned lessons in mind, industry analysts at NPD, a data analytics firm headquartered in Port Washington New York, expect 2021 to be a year of hope and recovery for restaurants.

Part of the reason for NPD’s optimism is that several restaurants experienced double-digit growth during the pandemic. So, if these concepts can grow through economic downturns, there’s little standing in their way during the boom years.

For example, Chipotle saw a year-over-year revenue increase of 11.6% with its Q4 sales topping $1.6 billion in 2020. In a conference call, Chipotle’s CEO Brian Niccol said these numbers have supercharged the company’s efforts to expand access and convenience through digital mediums.

“So we’re seeing a scenario where digital is going to prove to be very sticky and people look forward to getting back out and going into our restaurants,” Niccol told QSR Magazine.

NPD anticipates advances in digital and contactless payment technology will be a boon for the restaurant industry going forward. Adding convenience measures like drive-thru and delivery options can help sustain existing concepts, too.

“Off-premises occasions have been outpacing on-premises for years. The pandemic has now forced operators to fine-tune their capacity for high volume off-premises service whether through carry-out, drive-thru, or delivery,” the company said in a research paper.

Recovery and growth are predicated on how restaurants adapt to heightened customer awareness of cleanliness and increased demand for quality foods. Brand name concepts like McDonalds, Burger King, and Taco Bell have all increased their vegan and plant-based menu options. Meanwhile, several plant-based companies have partnered with US distributors as market competition intensifies.

After the 2020 election, restaurant industry leaders called on President Joe Biden to provide additional relief to small businesses. Since then, Biden has proposed raising the minimum wage to $15 per hour and offered $1,400 stimulus checks, but no clear answers on additional relief.

Biden’s $1.9 trillion reportedly contains $25 billion apportioned for restaurants, with a large portion already reserved for restaurants in New York, according to Eater NY. Unlike the Paycheck Protection Program, Biden’s rescue plan won’t allow restaurants or chains with more than 20 locations to apply. However, the industry has been lobbying for another bill that would allot $120 billion in relief known as the RESTAURANTS Act.

Any funds could immediately improve visual sanitation, which some analysts say will be a new form of restaurant marketing in the future. According to the Auguste Escoffier School of Culinary Arts, “Now more than ever, it will be critical for restaurants to demonstrate through clear action that they are creating a safe environment for patrons. It’s quite possible that frequent, visible cleaning will be necessary even for seldom-touched restaurant areas that are already clean.”

While these measures may seem overbearing at first, Kelly argues that it will all be worthwhile once customers start returning en masse.

“If you can create a safe dining environment, effectively target your best customers, and maintain—or even boost—your marketing spend, the more likely you are to successfully drive customers into your locations and sustain your restaurant business during this challenging time,” Kelly said.

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