By mid-March 2020, on-premises dining was restricted in 70 percent of all U.S. restaurants. Even now, the number is staggering. Customer transactions at major restaurant chains plunged 43 percent by month’s end, year-over-year. Full-service brands, devoid of a drive-thru lifeline, watched figures sink 77 percent.
The space between March 2020 and March 2021 feels more like an era than a year. And results reflect that.
This past March, with restrictions lifting across the country and vaccines spreading, transactions rose 32 percent versus 2020’s remarkable run, according to The NPD Group. Seeing that kind of outlandish lap is going to become standard in the coming months. Not unlike same-store sales comping against a year when a hurricane rolled through. It’s one reason COVID-19 has often seemed more like a disaster event than anything resembling the Great Recession.
If you pull the results back another 12 months, restaurants are still down 6 percent compared to two years ago (March 2019).
Yet operators will take the upward mobility. Full-service restaurants saw transactions jump 210 percent in March, or down 25 percent on a two-year stack.
Quick-service restaurant transactions, which fell 40 percent by the end of March 2020, rose 29 percent in the recent period and were 5 percent lower compared to March 2019. It provides another look into how COVID was not an equal-opportunity collapse. In fact, some quick-serves have never performed better than they are recently, thanks to a thinner field for off-premises business (full-serves either being closed or lagging behind with delivery, takeout, etc) and their leg-up across those channels.
Industry tracker Black Box Intelligence’s data showed a sales plummet north of 30 percent in March 2020. This year’s month, same-store sales lifted 62.3 percent. And Black Box actually reported growth on a two-year view—up 1.8 percent. It marked the first time in more than a year the industry notched positive two-year comps. The growth in March was almost 14 percentage points higher compared to sales expansion in February—the biggest monthly improvement in that two-year growth rate since June. Truthfully, this might be the statistic worth underlining. It suggests vaccines and other efforts are turning not just sales around, but consumer sentiment as well (more on this later).
Year-over-year same-store sales growth was 10.8 percent in Q1. Traffic for March 2020 was negative 9.4 percent, with all industry segments still experiencing declining guest counts compared to where they were two years ago. It’s likely this gap is being covered by higher checks, larger orders, and more off-premises business. That phenomenon generally pulls in two directions, helping quick-serves and hurting sit-down brands, which miss the alcohol attachment. But one thing that’s typically uniform at this juncture, although it’s impossible to predict where it heads, is restaurant chain are pushing historically higher digital and off-premises mix even with dine-in returning. MOOYAH president Tony Darden said it’s sticking about 10 percent above pre-COVID marks at units with reopened on-premises business.
Per U.S. Census Data released this week, food service and drinking places collected $62.2 billion in sales in March, up from $54.3 billion in February and $55.9 billion in January. It was $45.73 billion in March 2020 and $65.3 billion in February of that year—the pre-pandemic measuring stick.
With all that said, where the consumer is today is not as easy to define as the recovery curve. And, surely, a continuously moving target.
Revenue Management Solutions recently surveyed 1,119 people to assess how they view the industry today and where their mindset is as we approach summer.
Have you received the COVID vaccine?
- Yes: 17 percent
- No, but I have an appointment scheduled: 7 percent
- No, but I am waiting for the opportunity: 38 percent
- No, and I am not sure I will get it: 20 percent
- No, and I choose not to be vaccinated: 18 percent
Of those who said “not sure I will,” or choose not to,” 59 percent were women.
The headline here is that more than 60 percent of respondents have been, or plan to be, vaccinated.
Working environments have stabilized for more than 50 percent of RMS’s respondents.
Within the last three months, how has your work environment changed?
My work environment has not changed: 55 percent
- I now work primarily from home: 29 percent
- I now have the flexibility to work from home some days, and from the office on others: 10 percent
- I now work primarily from the office: 6 percent
The fact only 6 percent of respondents are now primarily working from the office indicates a slow return to pre-pandemic levels. Of course, this is a major point to follow for early daypart brands and any chain that courts habitual business, like Starbucks, for instance. Given that, expect Starbucks, Dunkin’, and others to continue incentivizing and innovating around late-morning or afternoon occasions. The flip to seeing a coffee beverage as an indulgent break more than a daily part of your drive to work.
There is growing optimism overall, however. Forty-four percent of respondents said they believe dine-in will return to pre-COVID levels within the next six months.
Seventy percent of February respondents believe vaccinations speed up recovery of the dine-in segment.
As expected, frequent delivery ordering has witnessed a slight decline since November.
You can see that below.
Younger generations continue to report higher restaurant usage across all channels. The percentage of those who use delivery once a week, though, declined by 12 percent for Gen Z and 8 percent for millennials.
Perhaps due to the work-from-home reality, or just because habits are difficult to reroute after a year, respondents are sticking to purchasing behaviors developed during COVID.
The percentage of respondents planning to eat out more post-pandemic is rising. Thirty-two percent of respondents said they plan on eating out more after COVID compared to 13 percent in August 2020.
Illustrated here:
So what’s keeping diners from returning? The number of COVID cases at the local level was the No. 1 deciding factor in RMS’ study.
Share of respondents who “agree” and “strongly agree” with the following factors when considering to dine out.
- Number of COVID cases at the local level: 61 percent
- Lack of safety measures adopted by other patrons: 60 percent
- Number of COVID cases at the national level: 53 percent
- Percentage of the population vaccinated: 49 percent
- Lack of safety measures adopted by the staff: 46 percent
It’s seems a relatively safe bet consumers who get the vaccine will return to dining out, at least from a broad stroke perspective. But as the earlier data showed, there will be a subset of guests who do not. How do you win them over?
Of those not planning on getting the vaccine, a majority still question if restaurants can provide a safe indoor experience.
Share of respondents who “Agree” and “Strongly agree” with the following deciding factors when considering to dine out.
Number of COVID cases at the local level
Vaccine status
- Yes, scheduled and waiting: 72 percent
- Undecided: 50 percent
- Will not get it: 33 percent
Number of COVID cases at the national level
Vaccine status
- Yes, scheduled and waiting: 64 percent
- Undecided: 43 percent
- Will not get it: 26 percent
Percentage of the population vaccinated
Vaccine status
- Yes, scheduled and waiting: 63 percent
- Undecided: 33 percent
- Will not get it: 18 percent
Lack of safety measures adopted by other patrons
Vaccine status
- Yes, scheduled and waiting: 69 percent
- Undecided: 53 percent
- Will not get it: 37 percent
Lack of safety measure adopted by the staff
Vaccine status
- Yes, scheduled and waiting: 52 percent
- Undecided: 38 percent
- Will not get it: 32 percent
Restaurants can provide a safe-dine experience outdoors
Vaccine status
- Yes, scheduled and waiting: 50 percent
- Undecided: 54 percent
- Will not get it: 52 percent
Something else optimistic to circle—household concerns seem to be shifting from economic impacts and infection to mental health and not being able to participate in desired activities. While this isn’t a great notion, it does signal people want to resume their pre-virus lives again. They miss connection and socialization, and restaurants can play that role as well as any sector in America.
What are your household concerns right now?
Not being able to do things I want to do
- February 2020 rank: 1
- May 2020 rank: 4
Members of my household becoming infected
- February 2020 rank: 2
- May 2020 rank: 2
The emotional/mental health of my household
- February 2020 rank: 3
- May 2020 rank: 6
The economic impact of the pandemic
- February 2020 rank: 4
- May 2020 rank: 1
Not being able to travel to see family and/or friends
- February 2020 rank: 5
- May 2020 rank: 3
Not being able to celebrate milestones with friends/families
- February 2020 rank: 6
- May 2020 rank: 5
Having the financial means to feed my family
- February 2020 rank: 7
- May 2020 rank: 7
Not being able to dine out in restaurants
- February 2020 rank: 8
- May 2020 rank: 9
If you were employed prior to the outbreak, meaning current employment
- February 2020 rank: 9
- May 2020 rank: 8
Although restaurants are not super high on this list, it shows how key perception will be in the COVID recovery. Restaurants can market toward many of these higher-up metrics, like celebrating milestones and seeing family and friends. Beyond standard incentives, restaurants could lure diners back by promising a safe place to reconnect, everything from date-night deals to kid-friendly environments to revamped alcohol programs. Brunch- and breakfast-centric chains like Another Broken Egg and First Watch have seen significant success with these of late—a sign that people are looking at dining out well beyond just the food.
Pre-COVID, Another Broken Egg reported between 10–12 percent of sales from alcohol mix. Come January, it was 25 percent, which drove check and profitability to record highs.
First Watch launched its alcohol program—the first since its founding in 1983—in November. CEO Chris Tomasso said pilots showed demand and incremental, additive business. And roughly two-thirds of the system has onboarded the program, which “also helps us appeal to a different demographic perhaps than we were before,” Tomasso said.
For families, keeping children occupied and active has become the No. 1 concern. This is no surprise to anybody who’s tried to work from home in the past year.
What are your household concerns right now?
Keeping my children occupied and active during the pandemic
- February 2021 rank: 1
- May 2020 rank 6
The emotional/mental health of my household
- February 2021 rank: 2
- May 2020 rank 3
Members of my household becoming infected
- February 2021 rank: 3
- May 2020 rank 2
Not being able to do things I want to do
- February 2021 rank: 4
- May 2020 rank 5
Having the financial means to feed my family
- February 2021 rank: 5
- May 2020 rank 8
Not being able to celebrate milestones with my friends/family
- February 2021 rank: 6
- May 2020 rank 7
The economic impact on local business in my community
- February 2021 rank: 7
- May 2020 rank 1
Not being able to travel
- February 2021 rank: 8
- May 2020 rank 4
Maintaining current employment
- February 2021 rank: 9
- May 2020 rank 9
Not being able to dine out in restaurants
- February 2021 rank: 10
- May 2020 rank 10
Again, there’s no reason some of these can’t meld together for restaurants. Plus, if a demographic shift to the suburbs truly comes out of COVID, a lot of millennial and younger families will find themselves trying brands they wouldn’t have in an urban setting. Mainly, this could offer a renewed chance for casual dining.
Value is going to be important, too. As always, in the places that fit. If it’s a core strength, now might be a good point to lean into it.
Worth thinking about this as well.
Most respondents told RMS safety precautions, increased minimum wage, and cost of food justify price increases. This is a delicate balance, however. Some guests will feel this way. Others will not. So value through a barbell approach might be a safer avenue that trying to raise the floor. That entry point will remain critical, especially for those struggling with finances on the backside of the pandemic.
Indicate to what extent you agree or disagree when it comes to justifiable reasons for restaurants to increase prices?
Increased safety precautions
- Agree: 58 percent
- Undecided: 26 percent
- Disagree: 16 percent
Minimum wage increases
- Agree: 55 percent
- Undecided: 26 percent
- Disagree: 24 percent
Increased food cost
- Agree: 58 percent
- Undecided: 24 percent
- Disagree: 18 percent
Baby Boomers proved the most understanding, with 70 percent saying they believe increase food costs justify price increases versus 41 percent of Gen Z.