Published: March 23, 2020
Written by Joseph Carbonara, Editorial Director
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.
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.