One step forward, two steps back. As the COVID-19 cases continue to rise throughout the country, exactly how that impacts individual operations will vary greatly depending on how the state or local government chooses to respond. One thing that remains certain, though, is the prominent role digital ordering and off-premises dining will play for operators as the industry trains its eye on Washington, D.C., hoping for some form of relief.

“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,” says David Portalatin, NPD food industry advisor. “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.”

With dine-in operations limited, consumers continue to search for contactless foodservice. As a result, digital restaurant orders from mobile apps, text messages, and the internet grew by 138% in the July, August, and September quarter compared to same quarter year ago, per data from The NPD Group. Off-premises orders from carryout, delivery, and drive-thru increased by 22% in the quarter compared to year ago while on-premises/dine-in declined by 62%.

Delivery had the strongest visit growth in the quarter, up 106%, but held the smallest traffic share, 9%, of off-premises services. Carryout held the largest traffic share at 46% with visits up 9%, and drive-thru visits grew by 27% in the third quarter. Overall, drive-thru represented 44% of off-premises visits.

The reasons these forms of service continue to drive results is simple. Customers feel safe using them. Per Datassential, 78% of consumers say they feel safe getting restaurant food via the drive-thru and 72% feel the same way about ordering for curbside pickup. In addition, 68% of consumers say they feel comfortable having restaurant food delivered and 65% say they are comfortable going into the restaurant to pick up their food. After that, consumers’ comfort with other forms of service drops considerably, which points to the ongoing importance of digital and off-premises for the restaurant industry.

Despite the success in these areas, though, overall restaurant visits, both physical and virtual, declined by 10% in the third quarter of 2020 compared to same quarter year ago, per NPD.

Overall, customer transaction declines at major U.S. restaurant chains held steady during the third quarter of 2020 at minus 9% every week in October compared to the same weeks a year ago, NPD reports. 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, according to NPD. The strong growth in digital and off-premises restaurant orders helped stabilize these declines.

In the short-term, expect to see restaurants continue to introduce virtual concepts to take advantage of consumers’ cravings for convenience and restaurant quality food. Just this week, for example, Nathan’s Famous introduced Wings of New York, a chicken-centric concept it will run from the kitchens in the New York market. Nathan’s Famous plans for Wings of New York to take flight and land in other markets soon. Of course, Wings of New York is not the only virtual concept hatched during the pandemic. Back in June, Brinker introduced Just Wings, a concept it operates from the company’s Chili’s and Maggiano’s locations. In addition, Bloomin’ Brands introduced Tender Shack, a virtual restaurant concept the company feels could grow as large as $150 million per year.

Virtual operations are not the exclusive domain of new concepts, though. For some restaurant chains they represent the opportunity to grow during more challenging times. Along those lines, concepts like Aloha Poke and Dickey’s Barbecue sought to expand their reach via the ghost kitchen route, with latter taking this approach in Chicago, Houston and Orlando, among other markets.

Varied Reopening (or Not) Plans

While the industry showed some signs of stability in the third quarter, what will happen during the fourth quarter remains anyone’s guess. Surging numbers of positive COVID-19 cases around the country have some state and municipal governments adding mitigations that restrict on-premises dining, yet again. As of Nov. 9, seven states have reversed their reopening plans, while another eight have hit pause. In some instances, the states remain committed to their reopening plans but certain municipalities have decided to implement more strident COVID-19 mitigation efforts that affect bars.

In New Jersey, for example, Governor Phil Murphy issued an order that says restaurants, bars, clubs and lounges that serve food and alcohol must close indoor areas by 10 p.m. daily. Outdoor dining can continue past 10 p.m., as well as takeout and delivery services. The measure also applies to casinos, although gaming operations can continue unaffected.

Effective Nov. 12, New Jersey will also put the kibosh on indoor seating at bars. Because some restaurants in the state need to use bar seating to reach their 25% capacity limit, New Jersey will allow them to place tables closer than the usual six feet apart, provided they are separated by barriers.

New Jersey’s action came just a couple days after Baltimore Mayor Jack Young implemented a handful of restaurant-related restrictions aimed at slowing the spready of the coronavirus. As of Nov. 12, all indoor and outdoor facilities, including restaurants, theaters, malls, casinos, entertainment venues, event spaces and religious facilities, should not exceed 25% of their usual maximum capacity. Bars without food licenses will shut down. Restaurants and other food service establishments must halt indoor dining by 10 p.m.

Turning west, five counties in Oregon face enhanced dining-related restrictions aimed at slowing the spread of novel coronavirus in that state, too. Those counties will limit the number of people allowed inside to 50 people, including staff and guests.

To help soften the blow of the cessation of on-premises dining ordered by Illinois Governor J.B. Pritzker last week, Chicago Mayor Lori Lightfoot formed The Chicago Hospitality Grant Program, which will provide restaurants and bars with grants of $10,000 each. Eligible establishments will have annual revenue of less than $3 million and must have experienced economic distress and loss due to COVID-19 on or after March 1, 2020, totaling at least 25% of annual net revenue. Funds must be used to cover operational costs including payroll expenses, replenishment of inventory and/or mortgage, rent and utilities payments. Grants will be distributed via lottery.

In contrast, restaurants in Alabama are preparing to increase on-premises dining capacity as of this week. Restaurants will need to continue to space tables six feet apart and the state requires dividers to separate each table. This also comes as Alabama chose to extend its mask mandate through Dec. 11.

Stimulus Hope

With the U.S. presidential election seemingly resolved, many in the industry remain hopeful the country’s leaders can come together to pass some form of economic stimulus that can provide relief to restaurants as well as the supply chain that support it. Failure to do so will undoubtedly mean many more restaurants will close in the coming months.

“So far, 100,000 restaurants of all types have closed across the country, and another 40% are unlikely to make it through the winter without additional relief from the federal government,’” says Tom Bené, president and CEO of the National Restaurant Association in a statement on the election. “If just 5% of restaurants close their doors between now and the end of the year, at least half a million jobs would be lost. We must all work together to build a plan that puts the country, and our businesses, on the path to recovery.

“In the coming days and weeks, there will be many discussions about long-term goals and priorities; however, the short-term needs of the restaurant and foodservice industry — the nation’s second-largest, private sector employer — cannot be overlooked,” Bené continues. “We ask Congress to support proposals that include immediate relief for restaurants and small businesses across the country. Without this assistance, thousands of restaurants will close before a long-term solution can even be considered. We urge Congress and the Trump Administration to return to work quickly and help get the nation on a path towards recovery.”