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Get ready for a big spring

Stimulus payments, easing restrictions, vaccinations—and easy comparisons—could make for remarkably strong sales over the next two months, says RB’s The Bottom Line.
Firehouse subs
Photo courtesy of Firehouse Subs

The Bottom Line

We spoke with Don Fox, the CEO of Firehouse Subs, for an upcoming Restaurant Community event on Thursday. Fox is generally a positive sort, but he was absolutely gushing about the upcoming few weeks, when consumers will be armed with extra cash and comparisons get easy.

It would not be surprising, he said, if same-store sales hit 90% to 100% at times in late March and early April.

To that end, Fox said his team plans to focus on two-year same-store sales over the next few weeks to get a true picture of his chain’s performance. But the implication is clear: Sales are about to look awfully good.

The biggest reason is those comparisons. Same-store sales in the second half of March fell 65%, according to Black Box Intelligence. They fell 55% in April. As a whole, the industry lost more than half of its sales in April and that probably is better than it would have been had a bunch of stimulus checks not arrived in consumers’ bank accounts in the middle of the month.

Even without any other assistance, a lot of restaurants would stand to see significant sales increases in the coming weeks. But President Biden on Thursday signed the American Rescue Act, which provides $1,400 stimulus payments to Americans—not to mention specific financial benefits to restaurants.

The package and its direct restaurant help, coupled with vaccinations and easing restrictions, has improved sentiment among independent operators.

For chains, the combination of ultra-easy comparisons and a consumer suddenly flush with cash could provide a sales environment that is unlike anything the industry has ever seen.

As we have seen twice now since the outset of the pandemic one year ago, consumers who are handed cash frequently turn around and spend it at restaurants. The industry’s sales recovery last April, for instance, can be traced specifically to the moment when the first round of stimulus checks began arriving in bank accounts and mail boxes.

The second round in early January had much of the same impact, providing a strong sales boost for weeks at fast-food and casual dining chains. There’s no reason to think the third round won’t have much the same impact, and likely for longer given the size of this one compared to the January number.

Easing restrictions and vaccinations will also likely cause sales to improve throughout the industry. Excess unemployment benefits that are part of the stimulus package will also provide more consumers with extra income, which in theory should provide the last necessary bridge to get the industry to the point where consumers are in a more normal state.

But as Don Fox pointed out, it can be difficult to judge a business based on easy comparisons and a consumer with an unusual amount of cash—which is why his company is looking at the two-year number, which compares the company to pre-pandemic levels.

That said, the spring could theoretically, at least for a while, easily exceed 2019 levels at many fast-food concepts because of that cash infusion and the reduction in the number of overall locations, which is spreading customers to a smaller number of units.

At the very least, it’ll give operators a strong boost coming out of the pandemic, which is refreshing after the past year.

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