The coronavirus pandemic and the government-imposed shutdowns of dine-in service swept through the restaurant industry like a tornado—skipping some houses while destroying others.
Some sectors and chains have been spared, and even thrived, even while others are struggling to survive.
We know the winners: Traditional fast-food chains with working drive-thrus, traditional pizza delivery chains and anything with an easy takeout strategy. The losers, however, are coming from a broad slice of the industry, targeting a surprisingly wide range of consumers from toddlers at birthday parties to well-to-do city business folks.
Here’s a look at the sectors hurt must during the pandemic.
The buffet business
Customers had started to return to restaurants in early May when John Haywood, the CEO of buffet concept Souplantation and Sweet Tomatoes, provided a bleak outlook for his concept. “We could overcome a lot of obstacles,” he said in an interview. “The inability to reopen our service model for some time really doubles the challenge.”
The company, having just gotten its footing three years after emerging from bankruptcy, opted to file for Chapter 7, closing all 97 of its locations and letting go of its 4,400 workers.
The buffet business was hit unlike any other sector. Even as dine-in business returned, the self-service business model became all the more difficult. What’s more, the sector itself was struggling long before the pandemic, as Souplantation’s bankruptcy attests.
The pandemic would lead to a number of buffet restaurant closures. Many others ended up in bankruptcy protection, including cafeteria concept K&W Cafeteria and salad bar-centric chain Sizzler. Golden Corral’s largest franchisee also ended up in bankruptcy.
The urban fast casual
Cities like New York, Chicago and San Francisco have been among the most aggressive in combating the coronavirus. But their downtown business centers have also been devoid of the lunchtime traffic many urban fast-casual concepts have depended upon for breakfast and lunch business. And it’s showed.
Owners unloaded Maison Keyser and Le Pain Quotidien. Roark unloaded Corner Bakery Cafe. Pre A Manger has struggled to survive. Shake Shack’s same-store sales remain deeply negative. Sweetgreen, an investor darling before the pandemic, laid off workers. It, and Shake Shack, are doing things that were once unthinkable: Developing suburban units with drive-thrus.
The same is true for Starbucks and Dunkin’. Well, they’ve been doing that for a while. But both chains decided to close numerous units during the pandemic while shifting more development toward suburban units with drive-thrus that have proven to be successful.
It remains to be seen if cities really will struggle in the post-pandemic world. But with more people expected to work from home over the long-term, many restaurants have had to rethink urban development strategies.
The “eatertainment” sector
Dine-in shutdowns were a week old when Punch Bowl Social, the fast-growing, hip food-and-games concept lost its investor when Cracker Barrel opted not to rescue the chain during the pandemic. Punch Bowl founder Robert Thompson ultimately left the brand, which is a shell of its former self.
It was hardly the only so-called “eatertainment” concept sent reeling because, well, it’s hard to socially distance while you’re crowded with a group of people playing skeeball. CEC Entertainment, the parent company of Chuck E. Cheese, would be the year’s largest bankruptcy filing, the result of a lot of debt and disputes with its landlords. Dave & Buster’s, the adult Chuck E. Cheese, still hasn’t reopened many of its locations, its sales deeply negative.
Not every experiential chain has had it thus. Topgolf, the chain of large golfing centers-slash-restaurants, was acquired by the equipment maker Callaway.
But that deal valued Topgolf at $2 billion. Earlier in the year, it had been considering an IPO with a valuation twice that.
The breakfast business
It’s a little difficult to sit here and argue that the breakfast business is reeling. Snooze just got an investment from private-equity firm Brentwood. McDonald’s generated positive morning sales in September. Wendy’s had by all accounts a successful breakfast debut.
But we are here to say that this business isn’t what it once was. The morning commuter largely gone, the overall business for fast-food breakfast shrunk. Both Burger King and Taco Bell saw steep declines in breakfast business. Dunkin’ and Starbucks saw customers shift from early to late morning.
But it’s in the performance of family-dining chains where this is particularly evident. Both Denny’s and IHOP have struggled during the pandemic. Denny’s same-store sales were down by more than a third in the third quarter—and that was an improvement. The numbers were similar for IHOP and Cracker Barrel.
It’s difficult to deliver breakfast, after all, and family-dining chains have never been as takeout-friendly as other concepts.
The upscale concept
It’s a little difficult to operate an upscale concept when the only thing going is takeout and delivery and business travel becomes almost nonexistent.
The U.S. Travel Association, a trade group, said it expects business travel to fall by nearly $200 million this year, to $141 billion from $334 billion. It also expects that it could be 2024 before spending on business travel reaches $300 billion.
Same-store sales were down 31% at Darden Restaurants’ fine-dining unit, led by The Capital Grille. “Obviously, we’re missing the business travel and those types of dinners,” Gene Lee, Darden’s CEO, said in September, according to a transcript on financial services site Sentieo.
Less business travel means fewer business meetings over dinners and corporate events at major restaurants. Business travel typically takes longer to recover coming out of recessions than leisure travel because companies take longer to open up travel budgets.
And this time, businesses have discovered the power of Zoom meetings. In other words: It could take even longer for that recovery this time around, and that’s bad news for upscale restaurants.
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