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Foodservice Industry Reacts to the COVID-19 Virus

The COVID-19 virus has taken the world by storm and the foodservice industry is no exception. From changing customer eating patterns to operators updating their approach to service, the industry keeps rolling with the changes from one minute to the next.

Despite the building tension around the COVID-19 virus last week, consumers continued to use restaurants last week. In fact, U.S. restaurant consumer transactions increased 4% for the week ending March 8, 2020 compared to the same period one year ago, per data from The NPD Group.

NPD attributes the traffic growth, in part, to the latest iteration of the breakfast wars, which saw quick-service chain Wendy’s make its much-anticipated return to the breakfast daypart. Anticipating Wendy’s return to breakfast, a collection of other quick-service chains, including McDonald’s, stepped up their promotional efforts, which also helped drive customer traffic and awareness. As a result, QSR chains also grew transactions by 4% for the period. This represents the highest gain in a 4-week period, according to NPD’s CREST Performance Alerts, which provides a rapid weekly view of chain-specific transactions.

“Thus far, the QSR sector has been resilient,” says David Portalatin, NPD food industry advisor and author of Eating Patterns in America. “In good and bad times, consumers are always looking for convenience and value, and they get that at QSR restaurants.”

Unfortunately, the news was not all positive for the restaurant industry. Customer transactions at full-service restaurants declined in the period, per NPD. Midscale/family dining chain transactions declined by 3% and at casual dining restaurant chains by 5%.

The full-service segment’s struggles could be a harbinger of things to come, unfortunately. Roughly 60 percent of consumers are now concerned about dining out, according to report released by Datassential, a Chicago-based market research firm. In fact, one in five customers have already started to cut back on dining out, per the Datassential study.

None of this is lost on foodservice operators and their partners.

Realizing the impact a downturn in dining could have on independent restaurants, third-party delivery firm Grubhub will waive its commissions for orders placed to independent operators, per multiple published reports. In addition, fast-casual Mexican chain Chipotle will offer free delivery on orders of $10 or more starting March 15, per a Bloomberg report.

In addition, coffee giant Starbucks is taking some steps to keep customers and its crew safe. Last week the chain paused customers’ use of personal cups in its stores. Customers who present a personal cup may still receive a discount from the chain, but they will get their coffee in a store issued cup. And just yesterday in an interview with CNBC, Starbucks CEO Kevin Johnson said some of its cafes may offer limited seating or only receive orders via mobile devices or drive-thru due to the coronavirus outbreak. Locations in the U.S. and Canada are preparing to modify operations if needed, he added.

While restaurants continue to draw tons of media attention, noncommercial markets are feeling the affects of the coronavirus crisis, too. Many colleges and universities, for example, continue to close their residence halls as they transition to virtual learning to limit the amount of time students and other members of their communities stay together. This will significantly impact meal plans and those who work in these facilities. In Chicago, for example, DePaul University has closed its residence halls through June and suspended the use of reusable cups, mugs, etc.

The situation with school foodservice becomes even more complicated. Various public-school systems throughout the country have temporarily closed, with some even going to virtual or e-learning. Students in many of these districts, though, count on their schools to feed them breakfast and lunch throughout the academic year. With the prospect of temporary closure looming larger, a variety of states, including Illinois, Washington, California and Alaska, have received waivers from the federal government that allow schools to provide food to students outside of a group setting in the event of school closures specific to coronavirus precautions. As a result, some of the schools are in the midst of making contingency plans while still feeding students who remain in school. Feeding hungry students during very short time frames on a daily basis adds an extra layer of complexity to the menu.

Looking Ahead

The situation surrounding coronavirus remains so fluid at the moment that determining what comes next for foodservice, or any other industry, for that matter, remains almost a fool’s errand. Everyone’s wondering if it’s ok to eat in restaurants. One health department official says yes, but with a few caveats.

That said, perhaps a look at the immediate past can become a prologue of what’s to come. For example, consumer data shows the categories that saw strong year-over-year growth in spending at the end of February were online grocery and meal kits, according to Black Box Consumer Intelligence. “This could signal an upcoming trend as consumers shift more of their share-of-stomach spending toward options that allow them to avoid contact with other people while giving them more control over food preparation and hygiene.”

In the interim, it remains advisable for foodservice operators to double down on food-safety efforts and follow these helpful tips from the National Restaurant Association Education Foundation. To help instill confidence in customers and crew, calm, clear and consistent communication will prove helpful, as consultant Matthew Mabel points out.

And stay tuned to for additional developments and updates to the industry calendar of events.