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As consumers concerned about health, COVID-19 takes a big bite out of restaurant sales

Restaurant sales down more than 60 percent in week ending March 27

New data is out showing that restaurant industry comparable sales continue to tumble as most restaurants operate in delivery and takeout mode only during the COVID-19 outbreak. Operators are experiencing a landscape in which consumers are following stay-at-home orders across the country and are practicing social distancing. During the week ending March 27, data from analytics firm Black Box suggests the industry is down more than 60 percent in comparable sales, a drop of more than 2-percentage points from the week before.

That bears out in financial business updates from established restaurant chains. In a letter to shareholders from Starbucks President and Chief Executive Kevin Johnson, the company reported that sales after March 12 were down 60 to 70 percent consistently and preliminary 2Q comparable sales were down 3 percent. A total of 56 percent of Starbucks stores have closed. In addition, nearly all of the company-owned stores that remain open are drive-thru locations. A total of 45 percent of U.S. licensed stores have closed, and the remaining open stores are primarily operating inside grocery stores.

Of course, the impact isn’t relegated to quick-serves. An update from full-service operator Darden Restaurants indicated that its Q4 results show comparable sales were down 39 percent. This reflects data from its most recent quarter, which began six weeks ago. In fact, during the last three fiscal weeks ended March 22, March 29 and April 5, Darden comparable sales were down 75.2 percent, 74.9 percent and 71.2 percent, respectively.

El Pollo Loco, which normally derives 78 percent of it sales from off-premises business, reported comparable sales were down 1.5 percent for its first quarter ended March 25. Based on the first two months’ comparable sales results of 3.7 percent and 4.2 percent, March comparable sales were likely down more than 12 percent, although not specifically reported in its latest update.

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Understandably, average checks in the table-service segments are down significantly. Fine-dining restaurants are down 43 percent and casual-dining is down 6.6 percent for the week ending March 27, according to data from Black Box Intelligence. Breakfast “out” looks to be one of the first customer luxuries being forgone during the current health crisis with comparable sales down 80 percent in that daypart.

Limited-service restaurants picked up a 3-percent gain in market share during the same week and there was a pull-back in full-service of just one percent. Like with Starbucks, restaurants that offer drive-thru pick-up have a chance to remain in the game. According to data from marketing insight and customer experience firm SMG (Service Management Group), drive-thru is the preferred method of takeout business currently among consumers. More than 75 percent of consumers prefer the drive-thru. SMG also found 16 percent of consumers were utilizing delivery more often, while 12 percent less often.

Younger consumers are becoming a greater mix of business for restaurants. Their share of spend, notes Black Box, is on the rise. Although pickup orders are less preferable than the drive-thru, a greater share of Gen Z prefers this option than older consumers. Across age groups, there may be a shift of restaurant spend, skewing toward Gen Z and Gen Y (Millennials).

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Across segments, casual-dining is getting the short end of the stick, with 72 percent of regular 2020 dining customers telling Black Box that they stopped spending at restaurants during the week ending March 27. For quick-service, that figure was 35 percent.

Aside from stay-at-home orders, mandated closures and social distancing requirements, consumers are genuinely worried about their health during this COVID-19 crisis. A total of 77 percent of consumers stay they are concerned about their health, notes SMG, while only 3 percent are not concerned at all. It remains to be seen what steps the government will take to provide mitigation efforts and inspire consumer confidence once states lift stay-at-home orders and open businesses back up.

Photo credit: El Pollo Loco

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