E&S Extra

jCarbonara

Joe Carbonara

Opinion pieces from our editorial director and editor in chief. 

Lemons to Lemonade

In March, when states and local governments began handing down stay-at-home edicts to curb the spread of the coronavirus and subsequently closed restaurant dining rooms, a very common line of thought was things would get back to normal sooner than later. Unfortunately, that’s not the case. According to the National Restaurant Association, more than 5.5 million restaurant workers had lost their jobs through mid-May. And as I write this, many dining rooms across the country remain dark as some states cautiously start to develop plans to reopen their economies.

Marching Onward

Business leaders typically navigate widespread disasters in three phases. First comes crisis mode followed by a period of stability before eventually moving forward while adjusting to the new realities of the day. Such is the case for the foodservice industry as it comes to grips with what its new reality may look like in a post-pandemic world.

Indiana Foodservice Manufacturer Joins the Fight to End the Spread COVID-19

With roughly 97% of restaurants facing restrictions of some sort to help stop the spread of coronavirus, operators have shifted their focus to off-premises sales to feed hungry customers and keep their businesses viable. Now foodservice equipment manufacturers are following suit, shifting parts of their operations to support their local communities.

Hospitality Relief Dashboard Plots a Course for Industry Assistance

The foodservice industry is home to countless people who have mastered their individual trades. And then there’s Tobin Ellis. Anyone who has ever spent five minutes with Ellis, founder of hospitality design firm BarMagic, can not only speak to his passion and dedication but will also tell you how much it rubs off on you. So, it should come as no surprise that Ellis can’t sit idly by and watch COVID-19 inflict so much pain among the many professionals that comprise the foodservice industry.

Shifting Consumer Sentiment Impacts Restaurant Transactions, Operations and Future

As the coronavirus crisis evolves on a market by market basis, consumer sentiment toward restaurants and other forms of food prepared outside of the home continues to shift. In doing so, the short-term challenges the industry faces continue to come into sharper focus.

For example, 47% of consumers now say they will definitely avoid eating out, according to a study conducted March 17-18 by Datassential, a Chicago-based market research firm. This marks a 20% increase since Datassential last queried consumers – just four days ago.

The growth was really pronounced among Baby Boomers, which grew by 31% in just 4 days. “The spike is particularly pronounced among Boomers, jumping a massive 31 points in four days. Where fear had previously peaked with parents, it’s now most prevalent in the aging population,” Datassential said in releasing this study.

Interestingly, the percent of consumers who describe themselves as nervous but still willing to eat out checks in at 29% in the Datassential study. This represents a 2% decline since the previous survey 4 days earlier. And 24% of consumers have no concerns about dining in restaurants, down 8% since March 14.

Restaurant transactions continue to support consumers’ current attitudes toward food prepared outside of the home. Restaurant customer transactions declined by 8% in the week ending March 15 compared to a year ago, reports The NPD Group, a New York-based market research firm. QSR chain customer transactions, which represent the bulk of U.S. restaurant transactions, declined by 7% in the week. Turning to the full-service segment, casual dining declined 22% and midscale/family dining dipped by 24%.

“The U.S. restaurant industry situation remains very fluid and the most recent week read of customer transactions reflect performance before mandated on-premise restaurant closures were implemented in multiple states,” says David Portalatin, NPD food industry advisor and author of Eating Patterns in America. “Some of the areas I’ll be watching closely in the coming weeks are delivery capacity, the pizza category, and third-party delivery platforms, like DoorDash, Grubhub, and Uber Eats.”

Indeed, as more and more state and local governments restrict access to restaurant dining rooms, digital channels for ordering and various ways of providing food will grow in importance for operators of all kinds. Looking back at the Datassential data, 57% of consumers said they would be willing to use a restaurant’s drive-thru during this current climate. And 53% of consumers said they would be willing to order ahead for pickup.

What’s most interesting about this data, though, is the fact that while boomers are skittish about restaurants in general, as noted above, they seem very open to drive-thru and order ahead options. In fact, an astounding 69% of boomers say they are willing to use drive-thrus now, which is 15% higher than Generation X, the next closest demographic, per Datassential. The trend applies when it comes to ordering ahead for pickup, too. In this example, 61% of boomers said they were willing to order ahead for pickup, which is 6% higher than GenX.

Potbelly’s Adjustments

For some chains, off-premises consumption and digital ordering were showing signs of life even before this crisis came ashore in the U.S.

“Our off-premise and digital channel, which accounted for a record 24.4% of sales in the fourth quarter of 2019, has increased steadily over the last week,” said Alan Johnson, CEO for sandwich chain Potbelly. “Investments in this channel have proven timely, as they helped build a flexible platform that is allowing us to adjust and react quickly to meet customer needs. This includes our new offering, curbside pickup, which is now available at most of our shops. This option gives the customer drive-thru like convenience and speed and offers another safe and efficient way to enjoy our fresh and tasty sandwiches.”

Potbelly’s company-owned shops remain open in accordance local guidelines across the various markets the Chicago-based sandwich chain serves. Delivery, in-shop pickup, drive-thru, or curbside pickup are available in those locations. In addition to its app, Potbelly also accepts orders via its website and third-party delivery providers DoorDash and Grubhub nationwide.

Unfortunately, COVID-19 has likely disrupted some of the momentum Potbelly and other chains like it built in recent fiscal quarters. “Through the first 10 weeks of 2020, we saw comparable same-stores sales of +2.5%,” Johnson noted. “We were on pace to record our fourth straight quarter of sequential same-store sales improvement and our first positive quarterly comp since the fourth quarter of 2016. However, market conditions have changed substantially in the last week as we face the realities of COVID-19.”

As consumers’ attitudes toward dining out shift, so do what they prioritize in a restaurant. In normal times, taste would reign supreme. But it’s been well established these are far from normal times. As a result, when asked to list their top considerations for choosing a restaurant, 45% said cleanliness, per Datassential. Taste came in second, nine percentage points less than taste. Other key considerations include the fact that the restaurant is nearby and value, at 36% and 34% respectively.

Still, the shift toward a greater emphasis on digital ordering and off-premises consumption was not enough for some chains to keep their locations open. Take, for example, Starbucks. In a matter of eight days the company made a series of dramatic changes to the way it serves customers, all in response to the COVID-19 crisis.

On March 20, the Seattle-based coffee giant announced it was shifting to drive-thru and delivery-only service at its U.S. locations. As part of this move, Starbucks closed all its cafe dining rooms, meaning customers could not place an order and walk into their neighborhood location to pick up their food. Starbucks anticipates this closure will last two weeks. The exception to this are Starbucks locations in and around hospitals and other healthcare locations.

Starbucks’ decision to adopt a drive-thru and delivery-only model underscores how fluid the situation remains for restaurants. In a March 12 letter posted to the company’s website, Starbucks CEO Kevin Johnson said the chain was “prepared to modify operations” to continue to serve customers. Then on March 15, Starbucks transitioned to its to-go form of service. Customers could still walk up and order at the counter, through the order ahead feature in the Starbucks app, via the drive-thru and delivery.

The big question remains how will this impact the industry long-term? And, in the short-term, how long can some restaurants hold out? It’s too early to tell with the former but with respect to the latter, bigger chains seem better prepared to ride out the crisis than some independents. As Tim Love, a Texas-based restauranteur said: “It’s worse than a tornado, it’s worse than a hurricane, it’s worse than a fire,” he says. “This is going to destroy everything that I’ve built.” Love should know, he opened three new restaurants in Houston less than a week ago.

Strengths of Hospitality Industry Shines Despite Pandemic

Without question, just about every type of business feels the effects from COVID-19 but for various reasons restaurants remain front and center in this conversation. Maybe it’s because most of us would like to go to the corner bar to drown our sorrows over the new coronavirus with a drink. Or perhaps it’s because people often use restaurants as a gathering place to bring friends and family together to share a meal and a laugh during challenging times like these. Right now, that’s not an option.

The Impact of the new Coronavirus on Off-Premises Sales and More

For the past few years, off-premises consumption has played a prominent role in the restaurant industry’s ability to continue to post positive, real growth. And with a variety of states and other municipalities banning consumers from dining on-premises it seems that carryout, delivery and even curbside pickup should be poised for growth as the COVID-19 crises plays out.

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.

Tentacles of Technology

Looking back at the past five years in the foodservice industry, no one factor has had a bigger influence than the rapid evolution of technology in this space. From the way consumers order their meals to the way operators purchase their equipment and supplies, the tentacles of technology continue to affect all aspects of foodservice in new and different ways.