Customer transactions at major U.S. restaurant chains declined by 10 percent in the week ending July 5 compared to same period year ago, an improvement over last week’s decline of 14 percent, reports The NPD Group. All of the improvement in the week sources to major quick service restaurant chains where customer transaction declines improved by 4 points from the prior week’s decline of 13 percent versus year ago.

Full service restaurants continued to struggle in the week with customer transactions down -30 percent compared to year ago, a 5-point decline from the prior week, according to NPD’s CREST Performance Alerts, which provides a rapid weekly view of chain-specific transactions and share trends for 72 quick service, fast casual, midscale, and casual dining chains.

“We are entering a new phase of the restaurant industry evolution:  the divergence of quick service restaurants and full service restaurants,” says David Portalatin, NPD food industry advisor and author of Eating Patterns in America. “Long before anyone ever heard of social distancing, consumers were showing an increasing preference for off-premise restaurant meals.  Then suddenly this March, we entered a reality where the entire restaurant industry was off-premise only. That harsh reality was far harsher for [full-service restaurants], a segment that saw transaction declines near 80 percent or worse at the depth of the pandemic in the U.S.  In contrast, quick-service declines were roughly half as severe thanks to their abundance of drive-thru windows, capacity for high volume pick-up, and the ability of large [quick-service restaurant] chains to leverage digital apps as an accelerant as well as provide a contactless experience.”

Two things have happened since dine-in services were closed in mid-March, according to Portalatin. The first is that quick-service chains have doubled down on their off-premise prowess with streamlined menus optimized for volume and efficiency and by expanding drive-thru capacity with reconfigured traffic flow and added lanes.

These changes are among the reasons quick-serves have continued to improve, whether or not their state and local authorities have granted reopening of dining rooms. 

Given this new off-premise capacity, many quick-service chain operators have found the incremental cost of opening a dining room to be greater than any incremental margin dollars they might gain and are remaining closed even when governing bodies allow reopening.  Secondly, full-service performance remains largely at the mercy of governmental regulation and the persistence of the coronavirus. For many full-serves, making the pivot to off-premise is far more difficult, he says. 

These restaurants can employ similar tactics as quick-serves, like streamlined menus, temporary drive-thrus made of pop-up canopies, and traffic cones, but none of these tactics play to the inherent strengths of these restaurants. Furthermore, as on-premise dining restrictions are lifted, many full-service operators are forced to dismantle much of their temporary off-premise infrastructure so that guests can park, have a waiting area that allows for social distancing, and labor can be redirected to the front of the house. Many full-service restaurants are now faced with shutting down all over again.

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