July, August performance under five percent year over year after seasonal adjustment
Forty-three percent of full-service restaurant operators lack confidence that they will be in business six months from now if the status quo continues. Restaurant owners and operators have been battling the health crisis itself, variable state and local ordinances meant to restrain the spread of COVID-19 amid spikes in cases and hospitalizations, and consumer wariness of dining out during the pandemic’s phases. A new marketing campaign by the National Restaurant Association—Restaurant Revival—with brand new ads meant to encourage dining out, was blunted severely by a new report from the CDC suggesting a link between dining out and a higher risk of contracting COVID-19.
A September analysis of summer trends points to troubling signs of a potential slowing in sales and a continued grim outlook by restaurant operators. After adjusting for seasonality, sales show signs of slowing from prior months when growth was in the double-digit range. August sales were up 4.7 percent from July, which were up 4.1 percent from June. However, the rate of change in trendline is significant from the percentages in May and June, which saw growth of 31.3 percent and 27.2 percent respectively.
Because seasonality is factored out, the month-to-month trend can better reflect sales recovery. At $54.6B, the slow crawl of improvement is far from a positive sign as the restaurant industry moves into fall. Last year’s autumn months saw approximately $65B in sales on average per month. This indicates that sales are trending down 16 percent from last year’s levels.
According to a report of August sales by data-analytics firm Black Box, chain restaurant sales decreased 12.3 percent from last year. The company’s analysis supports the current evidence that restaurants are running sales that are, at best, down in the teens from last year. It is important to note however that for the full year, restaurants will be more than 25 to 30 percent down in sales from last year, according to experts.
According to the National Restaurant Association data, along with the 43 percent of full-service restaurant operators that think they may have to close, 33 percent of quick-service restaurant operators feel the same way. On the flip side, a total of 57 percent of quick-service and 67 percent of limited-service operators responded that it was highly or somewhat likely they would be in business in the next six months.
Regarding a near-term rebound in sales, restaurant operators are not optimistic. Seventy-one percent of full-service operators, and 54 percent of quick-service operators, do not expect their sales to return to pre-coronavirus levels within the next six months. The inability of restaurants to fill dining rooms, whether due to restrictions or consumer caution, has hampered full-service operators even more than quick-service, putting them at a disadvantage.
It’s likely that the ongoing spread of COVID-19 in the country will continue to apply downward pressure on restaurant sales. Consumer attitudes play a huge role in restaurants’ ability to rebound, and consumers still feel unsafe and/or may be prevented by state or local government restrictions from interacting and socializing in pre-pandemic fashion. This has landed the restaurant industry in a tenuous position and has placed a premium on off-premises sales, on which QSR has a better handle. The Association reports that nationwide 100,000 restaurants could close permanently by the end of the year, representing about 17 percent of locations that existed at the start of 2020.
Photo credit: Louis Hansel (featured preview image)
About the publisher of this restaurant news site.