Operations

Restaurant recovery efforts stall

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July 28, 2020

COVID-19 case surges and the rollbacks in reopening plans have stalled the U.S. restaurant industry's recovery, according to The NPD Group. Major restaurant chain customer transaction declines have been between -11% and -14% versus a year ago since the second week of June compared to the steady improvement in declines from the last week in April through the second week in June. In the week ending July 19, major restaurant chain total customer transactions were down -12% versus a year ago, compared to -14% in the prior week, according to NPD's CREST Performance Alerts, which provides a rapid weekly view of chain-specific transactions.

In the week ending July 19, 78% of restaurants were in geographies that permitted on-premises dining with varying capacity restrictions. California had 13% of the nation's restaurant units, all of which were prohibited from offering on-premises dining. Many restaurants are also operating well below normal capacities in terms of menu offerings and store hours.

"I believe there is still a lot of upside recovery for restaurants, but for now we're stuck in neutral until we can get the industry operating at full capacity," David Portalatin, NPD food industry adviser and author of Eating Patterns in America. "The 'recovery' phase will then tell us whether the industry can recapture enough customer traffic to get back to the pre-COVID baseline, or whether the new normal will reflect a re-set where consumers prepare more meals in their home kitchens for a longer term."

In the week ending July 19, quick-service restaurant chains were responsible for the improvement in customer transaction declines, which were at -11% year-over-year while full-service restaurant chains declined to -27% year-over-year. FSR transactions would be worse without a significant shift to off-premises. In June, FSR off-premises traffic increased 91% versus a year ago while on-premises traffic declined -62%, according to NPD.

"Certainly full-service restaurants need to recover their lost on-premises business since that will always be their main source of volume," Portalatin said. "But, I wouldn't be surprised to see new casual dining models emerge that are designed to optimize off-premises capabilities for the long-term."

NRA blames second wave of restaurant closings

The National Restaurant Association sent a letter Monday to all U.S. governors and mayors stressing the industry's "unwavering commitment to customer and employee safety," despite the fact that it has lost more jobs and revenue than any other sector, citing $145 billion in revenue lost in the height of shutdowns.

"Just as we were starting to reopen our doors, nearly 100,000 locations have been shuttered again, by state or local mandate putting people out of work and costing owners thousands in lost reopening investments," according to the letter written by Lawrence J. Lynch, the NRA's senior vice president, science and industry.

Lynch said closing dining rooms that were operating within guidelines was harming communities and hindering industry recovery.

"The U.S. restaurant industry is historically highly regulated, which enables restaurants to work quickly and constructively with local and state regulators to enact new customer and employee safety protocols and to work with federal officials to adopt best practices like the new Centers for Disease Control restaurant considerations," stated the letter, which also noted said that the NRA has worked with the FDA, academia, the Conference for Food Protection, public health officials and industry representatives, to produce detailed guidance for the safe reopening of restaurants.

"Despite this unparalleled commitment to customer and employee safety, inaccurate information about the industry continues to dot media coverage, social media conversations, and statements from some public officials," Lynch wrote, adding the statements include references to a non-peer-reviewed paper about COVID-19 spreading in a crowded China-based restaurant.

"The paper cannot and should not be used as a reliable scientific model. In fact, the model was never reproduced and relies on customer density and seating patterns not currently allowable in any U.S. restaurant," wrote Lynch.

Making a comparison between that scenario and America's restaurant industry has had a negative impact on everyone in the industry and hindered recovery, he added.

"Surviving this public health crisis is a responsibility our industry and every owner and employee, takes seriously," he wrote. "The safety of our customers and employees has always been—and always will be — the top priority of our industry."

The letter included a copy of the NRA's Reopening Guidance which Lynch said was designed to be used in conjunction with the FDA Food Code requirements, and all guidance the CDC, FDA, and state and local health officials are requiring as the states move through the phased reopening of their economies.

"Closing restaurants a second time puts a dangerous strain on an industry that is struggling to stay afloat," Sean Kennedy, executive vice president of NRA public affairs, said in a release on the letter.