COVID-19's Impact, from the Perspective of Restaurant Owners

Many restaurants feel suffocated by the coronavirus timeline. Mainly, the harrowing reality there isn’t one. It opens the door to a point operators across the country have pondered in recent days, despite whatever measures they’re taking to repel the crisis: Will COVID-19 do irreparable harm to my business?

For the first time since this unprecedented deadlock spread nationwide, Datassential turned to restaurant decision makers for insight instead of consumers. The company fielded responses from 426 professionals from March 25–27.

Quickly, a significant point surfaced. While COVID-19 doesn’t discriminate in who it affects, the impact isn’t so evenly or randomly distributed among restaurants. Full-service locations less equipped to pivot to takeout and delivery have represented the tip of the spear. They’ve had to not just try to rearrange business practices, but also to bring along customer bases that have historically looked elsewhere for off-premises consumption. Also consider the trends we’re seeing with food choices. More comfort options. Pizza on the rise. A focus on “eating to live,” over “living to eat,” and viewing the daily practice as more of a necessity than an experience to share with others.

Just ask yourself what your lunch breaks have looked like lately. Like with any daypart expansion, ingraining customer behavior and changing spending habits takes time, innovation, and deliberate strategy. Before COVID-19, Wendy’s set aside $70 million to $80 million for advertising alone to promote breakfast awareness.

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Now imagine trying to educate customers with zero time to spare, no extra funds, and fewer employees on staff. That’s been the colossal challenge facing many full-service operators. Not to mention the added weight tied to urban spots that don’t have parking or room for things like curbside delivery. Or just fine-dining restaurants that don’t cook food intended to travel. The list goes on.

“All operators are focused on the task at hand, which is to stay open as much as possible and serve customers via the few methods left open to them,” Datassential said. “Job one for the supplier and manufacturer community is to be flexible. Right now, operators need to be supported, not just sold to.”

Some on-site segments are significantly more optimistic they’ll recover from COVID-19 stronger, like healthcare and K-12 foodservice. Why? Because they have essential roles to play. And officials are backing that up.

Restaurants, on other hand, are completely discretionary for all consumers at this point, which is why they’re significantly more worried about shutting down for good.

13 percent: Are feeling very nervous that their operations will not be able to come back to business.

How that splits: 19 percent for restaurants; 7 percent for on-site.

65 percent: Are worried, but fairly confident their operation can get through this in one piece.

How that splits: 67 percent restaurants; 64 percent on-site

22 percent: Are feeling cautiously optimistic and expecting to emerge stronger than ever.

How that splits: 14 percent restaurants; 29 percent on-site.

To recap, just 14 percent of restaurants believe they’re going to be in better shape when this comes to an end. If you combine the first two categories, a full 86 percent are worried or very nervous. Roughly two out of 10 don’t see a future after COVID-19.

This is pretty aligned with the National Restaurant Association’s 4,000-operator study that said 3 percent of restaurants had closed for good and another 11 percent anticipated doing so within the next month. Basically, the sentiment is in the mid-to-high-teens for restaurants today in terms of closing the doors and not reopening them.

Let’s break this down further by segment.

Very nervous

Fast food: 21 percent
Fast casual: 20 percent
Midscale: 24 percent
Casual dining: 20 percent
Fine dining: 4 percent
Healthcare: Zero percent
Lodging: 20 percent
B&I: Zero percent
C&U (campus and universities): 12 percent
K-12: 2 percent

Cautiously optimistic

Fast food: 26 percent
Fast casual: 3 percent
Midscale: 20 percent
Casual dining: 9 percent
Fine dining: 8 percent
Healthcare: 45 percent
Lodging: 13 percent
B&I: 24 percent
C&U: 25 percent
K-12: 38 percent

It might be most revealing to look at who is cautiously optimistic. The split between fast casual and fast food shows, perhaps, the impact not having drive thrus, or being located in more urban markets, is presenting overall. Fast casuals have had to pivot more than quick-service, large-scale counterparts. The recent results at Shake Shack spotlight an example of this in action. They’re a brand more rooted in dine-in business than, say, Wendy’s, which has seen its drive-thru mix skyrocket to 90 percent. Shake Shack witnessed sales drop an average of 70 percent across its corporate footprint.

Fast food was the only restaurant category to show more optimistic than concern—slight at 5 percent, but still there nonetheless. Fine dining appears to be sitting in the middle, with casual dining appreciating a large split, similar to fast casual. In recent days, the sector has been particularly challenged, with brands like The Cheesecake Factory furloughing 41,000 workers and deciding to not pay rent, CraftWorks dropping to fewer than 25 employees from 18,000, and many chains drawing down on revolving credit to provide additional financial flexibility.

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The timeline

According to Datassential’s research, the vast majority of operators don’t think COVID-19 will subside anytime soon. More than 60 percent are preparing for a 3–6 month hit; 13 percent said this will be our “new normal;” and 26 percent believe it will be over in 30–45 days.

The “new normal” designation has a lot of angles to it. Hard to predict what the future really holds, but it is probably safe to say things will never quite be as they were. Hopefully that just means more digital accessibility, employee benefits, and restaurants that pay attention to sanitation procedures. There’s no question, however, the landscape will feature fewer restaurants and some saddled with debt and left trying to mend broken fences. Yet there’s reason to hope the survival pack will be in better shape to serve customers than ever. A lot of factors and events remain, though, before trying to iron out what that means exactly. Here’s a look at what life could look like after COVID-19—a world where fast-food pizza chains grab share from independents and chains take a well-capitalized head start.

In Datassential’s survey, 30 percent of operators said they are closed completely for the time being.

How that splits: 25 percent restaurants; 35 percent on-site

65 percent: Closed dine-in area, but offer delivery/takeout

How that splits: 74 percent restaurants; 56 percent on-site

5 percent: Open for business completely

How that splits: 1 percent restaurants; 9 percent on-store

By category:

Closed dine-in, open for delivery/carryout

Fast food: 90 percent
Fast casual: 87 percent
Midscale: 75 percent
Casual dining: 64 percent
Fine dining: 56 percent
Healthcare: 66 percent
Lodging: 50 percent
B&I: 52 percent
C&U: 47 percent
K-12: 67 percent

Closed completely

Fast food: 10 percent
Fast casual: 13 percent
Midscale: 24 percent
Casual dining: 36 percent
Fine dining: 44 percent
Healthcare: 6 percent
Lodging: 46 percent
B&I: 39 percent
C&U: 51 percent
K-12: 31 percent

Just focusing on restaurants, there’s no secret why the first measure descends as you go down the list and the other side ascends. It correlates precisely with which sector is suffering the most right now—full service. Fine dining is just 6 percentage points shy of being half closed, according to this survey. Meanwhile, fast food lands at 10 percent. Quick-service brands were simply better equipped to meet the COVID-19 era demands. The pivot was a powerful one but it wasn’t seismic, like it’s been for sit-down restaurants. Customers have turned to fast food for convenience—drive thru and delivery—for years. Decades, really. Adapting has been far more disruptive for brands that never expected to have to do so in the first place.

And even those restaurant chains making changes previously, like some of the bigger casual-dining brands, still mixed a very small portion of business via off-premises. Chili’s parent, Brinker International, for instance, grew its off-premises sales more than 31 percent, year-over-year, in Q2. But that only measured to 17 percent of total sales, with delivery accounting for 5 percent (Maggiano’s included). At Chili’s in particular, delivery represented 4 percent. Here’s a look at how that’s changed in recent weeks.

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Help, where the concerns lie, and more

Datassential asked restaurants if receiving help from suppliers and manufacturers would be beneficial.

Yes, would appreciate help: 41 percent
Could use help, but not from suppliers or manufacturers: 42 percent
No, confident in next steps: 17 percent

“While America has rallied around foodservice workers impacted by the COVID crisis, with grassroots campaigns and a little extra carryout, operators on the front line know it’s not enough,” Datassential said.

This was echoed by the Independent Restaurant Coalition, which released a statement Friday about the upcoming Paycheck Protection Program. “The short-term relief made available through the Paycheck Protection Program in the CARES Act will be insufficient to ensure independent restaurants can stay open and continue to employ over 11 million workers. The unprecedented rise in unemployment is shocking, but those of us who work in restaurants are not surprised. Unemployment claims will continue to increase the longer restaurants are unable to open. There are over two million waiters and waitresses, 261,000 dishwashers, and 296,000 hosts and hostesses in America, and every restaurant that shuts its doors leaves them out of a job. Not to mention, we employ tens of millions more Americans through a vast supply chain of other local businesses, including farmers, fishermen, beverage distributors, linen services, and so many others.” Here’s a deeper look at all of that.

Datassential asked operators, “which types of financial support from business partners would be most helpful to navigate the coronavirus crisis?” We’ll just focus on the restaurant results.

Federal/state relief to help my employees: 73 percent
No minimal order requirements: 47 percent
Rent/mortgage relief: 64 percent
Flexible/extended payment terms for orders: 43 percent
Relief from payment processors: 48 percent
Relief from fees to franchisor: 18 percent
Cap/waiver commissions with 3rd party delivery providers: 25 percent
Ability to order out-of-stock delivery items for later: 12 percent
None of these: 7 percent

Datassential then presented the question, “which types of product support from business partners would be most helpful to navigate the coronavirus crisis.”

Unlimited access to cleaning supplies/food safety necessities: 44 percent
Unlimited access to “to-go” packaging/supplies: 38 percent
Unlimited access to my essential ingredients: 31 percent
Help donating perishable food somewhere needed: 25 percent
Advice to help pivot to off-premises sales: 17 percent
Marketing materials/content I can share: 12 percent
None: 24 percent

It will be interesting to see how this develops as we progress deeper into the crisis. Will off-premises materials and supplies become scarcer? How many operators will tap into marketing services and tech platforms (many of which have waived fees) to start reaching new customers and ease prior cost burdens. “Anything business partners can do to help make it easier to secure product, will not only add value, but help operators keep what business they still have,” Datassential said.

One of the big challenges throughout this process has centered on messaging. This is pretty uniform but especially true of any restaurant trying to tell customers it’s doing something totally different.

Brands need to get the word out, whether it’s informing guests they’re still open, sharing new menu options, like family bundles, or even collaborating with other local eateries on things like The Great American Takeout.

“Which types of service support from business partners would be most helpful to navigate the coronavirus crisis?

None: 35 percent
Help getting the word out to customers: 33 percent
Online resources to track updates/industry response: 26 percent
Local operator collaboration to promote traffic: 25 percent
Advice/training for deep cleaning: 22 percent
Help setting up online ordering/payment: 17 percent
Extra delivery drops: 10 percent
More frequent linen service: 4 percent

By restaurant category for “help getting the word out to customers”:

Fast food: 64 percent
Fast casual: 53 percent
Midscale: 56 percent
Casual dining: 40 percent
Fine dining: 60 percent

What the operators are saying

Here are some responses from decision makers in regards to what suppliers, manufacturers, or distribution partners could do to make the biggest difference.

From an Illinois chef manager:

“Share information on how to handle our new ‘takeout’ business. For instance, more information on takeout containers would be helpful. Because this is new to us, we don’t quite know what is available. This week I was looking for a microwavable one compartment, entree-sized to-go container and asked my distributor rep for help.”

Starting from scratch often starts with the basics.

Casual-dining manager in Georgia:

“As it relates to traffic, it would help tremendously [helpful] to advertise online and Uber Eats and DoorDash business.”

Another element of getting the word out.

From a foodservice director of a school in Texas.

“Sysco has given us a list of prepackaged items that we can use in school. Also, I have received an abundance of emails from vendors who represent pre-packaged items.”

From a midscale restaurant GM in North Carolina:

“We are all currently struggling and those that are open for delivery or takeout have very little funds coming in, in general. The delivery minimum should be dropped during this time, as people only need less essential items.”

This is a great point. Also speaks to what you’re seeing in many corners of the industry—restaurants selling essential items to guests. Basically, doubling as grocery stores in some ways.

From a casual-dining restaurant in Wisconsin:

“Just let us know that they are taking proper precautions on their end so we can reassure our customers that from start to finish the products we are preparing them are completely safe.”

This can’t be understated.

From a fine-dining chef in Vermont:

“Reaching out and offering us payment flexibility without penalty if needed. Credit card companies should not charge us fees for the duration of COVID-19.”

Some telling numbers

Below is how far sales decline has tracked overall since the outbreak of COVID-19 for the operators in the survey.

Fast food: –42 percent
Fast casual: –51 percent
Midscale: –70 percent
Casual dining: –73 percent
Fine dining: –82 percent

The latter figure is pretty eye-opening.

“Since the COVID-19 outbreak, which have you experienced?”

86 percent: Some increase in takeout, but not enough to offset dine-in losses
14 percent: Enough increase in takeout to offset dine-in losses

Sometimes, no matter what efforts a restaurant puts in, there’s simply no way to cover that gap. That’s a harsh pain point attached to COVID-19.

“Have you laid off staff in response?”

We let go of more than 75 percent of our staff

Fast food: 5 percent
Fast casual: 17 percent
Midscale: 45 percent
Casual dining: 45 percent
Fine dining: 72 percent

No staff cuts due to coronavirus so far

Fast food; 49 percent
Fast casual: 37 percent
Midscale: 9 percent
Casual dining: 16 percent
Fine dining: 4 percent

Yet another example of how fine dining is taking the brunt of this crisis—only 4 percent avoiding layoffs to date.

Changes being made

Nearly half of the operators in Datassential’s study said they pared down food and beverage offerings. It saves costs, simplifies operations, and is also generally better suited for off-premises.

Narrowed / limited your menu offerings (fewer menu choices): 43 percent
Added price discounts / coupons / meal deals: 17 percent
Added large / family-size / bulk size options (full trays of dishes, etc.): 12 percent
Added more “comfort food” type menu items: 11 percent
Added refrigerated or frozen “take and bake/heat” items: 10 percent
Added full meal bundles (comes with appetizer, entrée, sides, dessert): 9 percent
Added more “healthy / better-for-you” type menu items: 6 percent
Added more “indulgence / treat yourself” type menu items: 6 percent
Added multi-day meal options (12 individual-sized servings of a dish, etc.): 4 percent
None—we have not made any menu changes because of coronavirus: 34 percent

“Have you implemented any other operational changes specifically in response to COVID-19?” (focusing just on restaurants)

Closed off seating / stopped dine-in service: 74 percent
Reduced hours of operation: 66 percent
Updated food safety procedures (wearing / changing gloves, scheduled cleaning / deep cleans, etc.): 56 percent
Added curbside pickup (staff delivers order to customer’s cars): 59 percent
Contacted customers directly (via website, email, social media, etc.) about policies / updates: 34 percent
Began offering contactless (no touch) delivery: 30 percent
Shuffled / re-purposed staff to help in other areas (servers / bartenders handling delivery, etc.): 27 percent
Added new online ordering and/or pre-pay functionality: 20 percent
Signed on to new third-party delivery services (Grub Hub, UberEats, etc.): 22 percent
Begun offering paid sick leave to staff: 7 percent
None—we have not made any operational changes because of coronavirus: 5 percent

When you really think about it, 22 percent jumping onto third-party delivery is a massive number in a three-week span.

Cutting back

Nearly half of foodservice locations said they’ve ordered less fresh produce, with nearly as many reducing their intake of dairy, fresh meats, and bakery items.

“Have you stopped or reduced purchases of any categories as result of COVID-19?”

Quick service