facebook pixal

The pandemic cut restaurant sales in half

Industry sales hit a 15-year low in April, according to new federal data. RB’s The Bottom Line says that a full recovery could take years.
Photograph by Jonathan Maze

bottom line

Restaurant sales took a massive nosedive last month even as many chains reported sales recovery in the last half of April.

According to new federal data, restaurant sales fell nearly 30% in April to $32.4 billion. The last time it was that low was 2005, back when George W. Bush was just beginning his second term as president and McDonald’s still owned Chipotle.

Since February, sales have dropped by just more than 50%, and sales declined by 51% on a year-over-year basis.

Those numbers, when coupled with the steep decline in employment, demonstrate just how big a hit the industry took in late March and April when states began closing dining rooms, leading to widespread unit closures and steep declines in service levels.

Both the employment numbers and sales data should begin their recovery starting in May, as consumers have clearly started returning to restaurants by lining up at drive-thrus and ordering delivery.

The big question is how long that recovery should take.

We’ve seen repeated evidence that consumers have readjusted to their lifestyles to return more of their food spending to restaurants.

Consumers have long spent more at restaurants than they do at grocers. In February, Americans spent $65.4 billion at restaurants, and just over $57 billion at grocers.

In March, however, their grocery spending surged to $73 billion, a 29% increase over February’s numbers.

While grocery spending slowed to $64 billion, it was still nearly twice as high as restaurant spending.

Consumers cut back on their total spending at restaurants and grocers. In February, the two industries combined for $122.7 billion in spending. In April, that declined to $96.3 billion—more than 20% lower.

That’s the kind of cutback you’d expect by a population that has suddenly found itself in the midst of a sudden surge in unemployment expected to reach Depression-era levels—not to mention one that is fearful of catching a potentially deadly contagion.

The stimulus, of course, is easing consumers’ financial fears, while delivery, takeout and the drive-thru are easing fears of the contagion. Both have helped spur something of a comeback in recent weeks, as consumers lined up at drive-thrus and waited outside casual-dining chains for takeout food. They made big days of Cinco de Mayo and Mothers’ Day.

That comeback is a return to the mean, of sorts. Consumers had grown accustomed to eating at restaurants and were willing to do so even if it meant lining up 129 cars deep at a Freddy’s Frozen Custard.

Many believe this could be a sign of a quick recovery. Indeed, consumers clearly prefer eating at restaurants and had some pent-up demand after several weeks of severe cutbacks. The sales should provide some confidence to the industry broadly that more operators will be able to make it through the pandemic intact.

At the same time, however, a full recovery is still probably years away.

For one thing, some sectors are still in the dumps. On Saturday, restaurant traffic was just 7% of what it was a year earlier, meaning the upscale restaurants that typically rely on reservations are still doing quite poorly, if they’re open at all.

How long these restaurants return to previous sales levels will depend on how many of them actually reopen, and how long it takes business spending to ramp back up again. Companies still in cash-hoarding mode will likely need extra time to clear business-related travel again.

For another, the stimulus dollars will eventually run out, and will need to be replaced by paychecks. With 36 million Americans unemployed, that seems a long way off.

Want breaking news at your fingertips?

Get today’s need-to-know restaurant industry intelligence. Sign up to receive texts from Restaurant Business on news and insights that matter to your brand.


More from our partners