Restaurant sales

First look at the impact of the coronavirus on restaurant sales

The spread of COVID-19 over the past few months — and subsequent social distancing and closed dining rooms — has reduced restaurant sales in all corners of the industry. But the situation has cut some brands much deeper than others.

In this overall negative picture, there are clearly haves and have-nots. Analysis of recently released comparable store sales results reveals those that did better had a few things in common: drive-thru, menu staples well suited for delivery, or a strong digital infrastructure that made it easier for them to switch to an offsite model.

Meanwhile, casual dining brands built around their dining experiences, unsurprisingly, saw some of the steepest membership drops after the start of government restrictions on restaurants and social gatherings in the United States from mid -March to the end of March.

Nation’s Restaurant News reviewed the results of the top 200 publicly traded companies or divisions that reported comps for the quarters ending on or about March 31 — along with others providing clues as to what they’ll be reporting soon – to shed light on the toll the coronavirus has taken so far, as well as the depth of the challenge the industry may face as it moves forward.

Delivery and drive-thru expertise provides an advantage

Of the 20 restaurant chains or divisions whose recent results were reviewed, only six escaped the quarter with positive comps. These were: the American Wingstop Division; the North American and International divisions of Papa John’s; Domino’s, US and International Divisions; and the American division of McDonald’s.

The brands were all marked by a strong emphasis on digital infrastructure and/or store locations equipped with drive-thru.

Wingstop, which in recent years has worked to build and refine its mobile ordering infrastructure and delivery presence, has found itself well positioned to quickly transition to a delivery and takeout model. As a result, its national system reported a 9.9% increase in comps for the quarter ended March 28, which was actually an improvement from the 7.1% increase in the same quarter a year ago. year.

Starbucks saw same-store sales drop 3% in the U.S. market for the quarter ended March 29. But executives noted that same-store sales fell 65% last week in March.

Pizza delivery people are also doing relatively well. Papa John’s posted comparable store sales increases of 5.3% in the United States and 2.3% internationally for the quarter ended March 29. and a 1.5% increase in its international division. These numbers marked significantly slower growth for Domino’s, but were nonetheless strong compared to brands in other segments.

McDonald’s in the United States barely creaked on the dark side of the ledger with a 0.1% increase in the first quarter, compared to 4.5% growth in the same quarter a year earlier. McDonald’s has recently been the best performer among the Big 3 hamburger chains, but its 8.1% improvement in national same-store sales in January and February was all but offset by the 13.4% drop in sales at comparable stores seen in March, executives said.

Full service wins the greatest success

The early casual dining chains saw some of the largest membership declines. Among them were three well-known fine brands: The Cheesecake Factory, Fleming’s Prime Steakhouse and Wine Bar and Bonefish Grill, with declines of 13%, 13.2% and 13.9%, respectively. While these declines appear relatively subdued, given widespread dining room closures, they may be due to a timing issue, as table service bans came relatively late in the quarter.

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Fine-dining and casual dining brands like The Cheesecake Factory, Fleming’s Prime Steakhouse and Wine Bar, and Bonefish Grill had some of the biggest same-store sales successes this spring as dining rooms were forced to close.

A clearer picture of the true potential impact of the coronavirus can best be seen at several full-service operators in unscheduled reports or additional notes in conventional tax returns, such as those detailing the erosion of comps by 46%, 40 % and 38.6% for the month of March (or a five-week period ending around the end of March) by The Cheesecake Factory, Fleming’s and Bonefish Grill, respectively.

But some of the most startling early reports came not from the casual or fine dining segments, but rather from the pizzeria ranks. CEC Entertainment Inc., parent company of Chuck E. Cheese’s and Peter Piper Pizza, reported a 21.9% drop in same-store sales at nationwide establishments that traditionally depended on crowds of kids playing game and of their parents.

A sign of things to come?

The mixed results of the first companies to report indicate how quickly and decisively COVID-19 reversed past progress. As a group, over the last quarter, the brands tracked have on average seen their same-store sales decrease by 5.4%. That compares to an average comp growth of 2.7% in the immediately preceding quarter and an average increase of 2.4% in the same quarter ended March a year ago.

Additionally, as was the case with casual dining brands, full-quarter results often masked the steep declines seen in the final weeks of the quarter after social distancing efforts began in earnest. Early results from several companies show how much results fell once these restrictions became widespread.

Starbucks, for example, reported a 3% decline in comps for the US market for the second quarter ended March 29. But executives noted that same-store sales fell 65% last week in March. By comparison, the U.S. division of Starbucks saw comp growth of 6% in the prior quarter and a 4% increase in the first quarter of the prior year.

Noodles & Company management shared some equally compelling numbers. They noted that while the pasta and more fast-casual brand exited the first quarter with a relatively manageable 7.2% drop in comps, compared to 3% growth a year earlier, the decline over the past three weeks March amounted to a step back of 46.3%.

Earlier this month, Red Robin executives reported that while same-store sales rose 3.4% in the eight weeks ending Feb. 23, things turned negative in the week. ending March 8, then fell over 70% in the second half of March before improving slightly to minus 63.9% and 65.2% in the first two weeks of April. Red Robin has yet to report full results for its most recent quarter, which ended April 19.

Wendy’s, while noting that it launched the chain’s “very successful” new breakfast service in early March, also telegraphed its pandemic crisis ahead of its scheduled quarterly report. Before the March 29 end of the 13-week first quarter, Wendy’s management disclosed that same-store sales increased 2.8% in the first 12 weeks, but acknowledged that they fell approximately 20% in the last week of this channel.

Contact Alan J. Liddle at [email protected]

Follow him on Twitter: @AJ_NRN