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Restaurant Recovery Drags

Surging numbers of positive cases continues to stall the restaurant industry’s recovery from the closures aimed at slowing the spread of COVID-19.

Transactions among restaurant chains declined 14% for the week ending June 28 compared to the same week one year ago, per data from The NPD Group. This marks a 1% decline from the previous week and the second consecutive week in which the restaurant industry did not show improvement in this all-important metric.

Nationwide, customer transactions at full-service restaurants for the week ending June 28 declined 25% versus the prior year, down one percentage point versus last week’s year-over-year comparison, per NPD. On the surface, a 1% decline may not seem so bad, but a closer look reveals several states where COVID-19 cases continue to grow rapidly also experienced he biggest declines in full-service restaurant transactions. Louisiana, South Carolina, Texas, North Carolina, Georgia and Arizona saw declines of 6 to 9 percentage points in year-over-year comparisons from last week. Customer transactions at major quick-service restaurant chains declined by 13% compared to the same week last year, down 1 point from last week’s decline.

“Consumer demand is there, as is the want for normalcy, but there is nothing normal about this situation,” says David Portalatin, NPD food industry advisor.

Exactly how states and municipalities are responding to the surging cases varies widely by region. For example, last week Texas rolled back indoor dining to 50% of a restaurant’s capacity due to repeated surges in cases. Later that same week, Michigan prohibited bars from offering indoor dining, with the exception of those operating in the northern portion of the state and the Upper Peninsula. The affected bars returned to offering outdoor drinking and takeout. And in Pennsylvania, a spike in cases caused restaurants and bars in Allegheny County, which includes Pittsburgh, to close for dine-in service until July 10. This came just one week after restaurants and bars were permitted to start serving guests on premises again. And on July 6, Florida’s Miami-Dade County forced restaurants and bars to close for on-premises dining in response to the growing number of cases in the region.

The surge in positive COVID-19 cases has restaurant operators across the country reevaluating their plans. Take, for example, McDonald’s. On July 1, the Chicago-based burger giant placed a 21-day hold on reopening any of its dining rooms. Interestingly, McDonald’s franchisees who had already reopened their dining rooms will not have to take that back, unless the local authorities require them to do so.

There’s a growing sentiment among restaurant operators that being forced to shutter shortly after reopening could cripple comeback efforts, too. Reopening requires restaurants to invest in ingredients, PPE, the sanitization of their locations, to hire back and train staff on new sanitation and service guidelines – all of which comes with a price. So having to close before they actually open may prove costly, as one New York restaurateur points out in this CNBC interview.

Ironically, or perhaps not, the resumption of dining room closures come during a time when consumers clearly are becoming more comfortable navigating the new now. For example, 82% of consumers say they know what steps to take to stay safe from COVID-19 exposure, per a study by Chicago-based Datassential. Further, 60% of consumers say COVID-19 safety precautions have become second nature to them. One way of interpreting this is to see consumers as adapting to the circumstances of the day. Conversely, can consumers’ comfort with COVID-19 be leading to complacency, thus driving up the numbers of cases? It’s hard to say.