No one could have predicted the impact the coronavirus (COVID-19) would have on everyone’s lives when the virus started to spread around the country the first few months of 2020. When the first round of stay-at-home orders were issued and restaurants were forced to close, consumer eating habits changed.
Eating out at restaurants was temporarily put on hold and was quickly replaced with more at-home prepared meals. Even with drive-through, carryout and curbside pickup options available from many foodservice establishments, food consumption in the United States flipped. A 2018, Zagat survey showed Americans ate out 5.9 times per week on average. When the coronavirus hit, dining out came to a screeching halt.
As stay-at-home orders were slowly lifted on a city-by-city, state-by-state basis, restaurants were permitted to reopen at varying capacities and sales started to slowly increase, but the damage had already been done.
The National Restaurant Association (NRA) is predicting that the restaurant industry is on pace to lose $240 billion in sales by the end of the year. Technomic Inc. is forecasting a loss of between $250 billion and $300 billion in sales.
Nearly one in seven restaurants, which represents approximately 100,000 dining establishments, have closed this year, either for a long-term closure while the pandemic continues or permanently, according to the NRA.
Early in the pandemic, in mid-March and April, foodservice sales were rapidly declining. According to Susan Schwallie, executive director of food and beverage consumption for the NPD Group market research firm, data through March 22 showed total foodservice traffic down 36%. The decline was 34% for quick-service restaurants and 71% for casual and fine dining restaurants that don’t have carryout or delivery infrastructures in place.
In the week ended April 12, customer foodservice transactions were down 44% compared to the same period in 2019, which was the lowest point recorded during 2020. For full-service chains, which were most impacted by mandated dine-in closings, transactions declined 76% year-over-year in the week ended April 12.
“Clearly this is an industry that is – I don’t even want to say struggling. It’s really tragic what’s happening right now,” Schwallie said during a March 27 webinar organized by The Center for Food Integrity, Gladstone, Mo.
During those times of declining sales, many restaurants got creative to find ways to keep sales coming in. Some high-end restaurants started sending out meal kits with instructions showing consumers how to prepare the meals they would have prepared in the restaurants.
“They need to move out their inventory,” Schwallie said. “They can’t just have that food sitting there.”
Other tactics showed up among restaurants that offered delivery and carryout. “I’ve seen some delivery advertisements for ordering takeout, and you’ll get a side of toilet paper,” Schwallie said.
Some states loosened their regulations allowing takeout alcohol purchases to help restaurants recoup some of their lost sales. But still, the restaurant industry suffered.
After 21 weeks of double-digit declines in transactions at major US restaurant chains, sales improved into the single digits the week ended Aug. 16, The NPD Group reported. Customer transactions were down 9% the week of Aug. 16, compared to the same period in 2019.
Recovery continued at a quicker pace for quick-service chains, with transactions down 8% compared to a year ago. Full-service chains, which were most impacted by mandated dine-in closings that were slowly being lifted throughout the summer, saw transactions decline 19% year-over-year, a 57-percentage point gain from the steepest decline of 76% in the week ended April 12.
Even burger chains felt the ongoing impact of the pandemic on sales. US comparable sales for McDonald’s Corp. rose 4.6% during the third quarter of fiscal 2020, ended Sept. 30. While strong, the growth could not offset the challenges the chain faced in other parts of the world. Overall, comparable sales fell 2.2% during the quarter.
“We started the third quarter with nearly all of our global restaurants open for business, and they remain open today,” said Kevin M. Ozan, chief financial officer on Nov. 9 during a conference call to discuss third-quarter results. “However, with the (virus) resurgences … there are numerous instances of government restrictions on operating hours, limited dining capacity in most countries and in some cases, mandated dining room closures.”
Net income for the first nine months of fiscal 2020 was $3.35 billion, down 25% when compared with the first nine months of fiscal 2019. Sales for the period were down 13% at $13.89 billion.
While McDonald’s results are recovering when compared to performance during earlier stages of the pandemic, Ozan said he expected restaurant “starts and stops” to be the likely operating environment for as long as the virus is present.
“Although transactions are still down, the move into the single-digits is a positive sign for the US restaurant industry,” said David Portalatin, NPD food industry advisor, in August. “Although we’re stuck in neutral for now, I firmly believe there is still a lot of upside recovery for restaurants. My belief is rooted in one reality: Consumers are not willing to give up on the convenience and experience a restaurant meal brings to them and their families regardless of the barriers.”
Each year, The NPD Group analyzes a year’s worth of data from its daily tracking of how US consumers eat, away from and in home, and compiles its “Eating Patterns in America” report. This year’s report, thanks to the pandemic, shows a different view compared to years prior.
“With mandated shelter-at-home and restaurant dine-in restrictions across most of the country during the pandemic, we have had few options other than to prepare most of our meals at home,” Portalatin, author of the report, said. “Working from home, schooling at home, and preparing more meals means more of our meal times are a departure from the norm, with most consumers describing their meals as atypical.”
For several years, NPD’s research has shown that 80% of American consumers’ meals were sourced from home and 20% were from restaurants and other foodservice establishments. During this year’s pandemic, the at-home numbers have increased to 87%.
According to NPD’s CREST Performance Alerts – which provides a rapid weekly view of chain-specific transactions and trends for 75 quick-service, fast-casual, midscale, and casual dining chains representing 53% of the commercial restaurant traffic in the United States – off-premises orders from carryout, delivery and drive-thru increased by 22% during the third quarter (July, August and September) compared to year ago while on-premises/dine-in declined by 62%.
In October, NPD reported customer transaction declines at major US restaurant chains held steady at -9% every week in October compared to the same weeks in 2019. Quick-service restaurant chains also stabilized transaction declines at -9% throughout the month. Full-service restaurant chains saw transaction declines fluctuate from -16% in the first week of October to -14% in the last full week of the month.
“While some of the steep transaction and traffic declines experienced at the height of the mandated shelter-at-home and dine-in closures have been recovered, many uncertainties lie ahead for the industry,” Portalatin said. “The continuing pandemic, governmental restrictions, and relief funding are just a few of the uncertainties. But, what we do know for certain is that consumers continue to rely on restaurants and other foodservice outlets to prepare their meals, and there is pent-up demand while we wait for a return to normalcy.”