A Long Recovery: Restaurants Coping with the COVID-19 Impact

By: Stephen Bergeron, V.P. of Sales & Marketing North America of APG 

Restaurants are reopening in states that were hit hard with COVID-19 restrictions. Social-distancing policies are not allowing restaurants to return to pre-pandemic operation levels, in most cases they are being forced to function at no more than 50% capacity.

Restaurants still must contend with patron fears of being too close to other customers because of the virus. With some creativity and help from municipal authorities, restaurants were able to convert portions of parking lots and sidewalks into dining areas, allowing them to increase seating while following social distancing guidelines.

Some hospitality businesses pivoted quickly, promoting the purchase of gift cards and encouraging customers to use online ordering for curbside service options such as GrubHub, DoorDash or UberEats. Changes in state and local regulations enabled curbside pickup of beer and wine, which helped local restaurants maintain sales. 

Despite all these efforts, restaurants – both chain and independents – have been hit hard by the pandemic.

The Numbers – Not Too Easy to Digest
Scrappy, innovative owners will find ways to remain in business, but not all restaurants will survive the economic impact of the coronavirus. Closures are inevitable, and IHL expects that 60% of the 313,600 of store closures projected for 2020 will be in the hospitality industry, which includes independent restaurants.

Since the start of the pandemic, IHL estimates that restaurants have lost 17% in sales. By year’s end, they will have lost 25% of revenue. However, quick service/fast food restaurants will fare better, with IHL projecting a sales loss of 13%. Quick serve and fast food businesses rely heavily on takeout, which for two to three months in some states was the only way to buy restaurant meals.

The pandemic’s timing was almost perverse. The restaurant industry appeared on track to a healthy year, with sales climbing 9% in February. Then they dropped 25% in March, and 49% in April.

The Resurgence Impact on Restaurants
IHL’s projections came during a webinar in June. At the time, states such as New York, New Jersey and Massachusetts, where the virus had an early impact, were on the way to recovery. However, the projections were released before resurgence in coronavirus cases now under way in other parts of the country, particularly in states like Florida, Texas and Arizona.

How the resurgence will affect overall projections is to be determined, but the economic impact of the pandemic has already been strongly felt by restaurants – and the hospitality industry in general. Restaurants are especially affected because they could not have dine-in guests while lockdowns and stay-at-home orders were in effect. Even as they reopen, they must do so at reduced capacity, usually at 40% or 50%, making it difficult to turn a profit.

Restaurants face another issue: Drawing key employees back. Recently passed unemployment benefits, have some workers earning more than while they are working, creating a disincentive to return to a low-paying job. Most restaurants are now taking reservations in advance, limiting the weekend rush or walk-in traffic – another byproduct is of a smaller workforce.

Patrons are not the only people nervous about the spread of the virus. Employees returning to work also fear contact with an infected person.

Safety Consideration for Patrons and Hospitality Employees
Restaurant reopenings require some serious thought and effort by owners and managers. The Food and Drug Administration (FDA) has published a list of best practices for safe reopening procedures.

Restaurants also will need to invest in sanitation and safety products, such as sneeze guards, pin pad and keyboard covers, masks, gloves, social distancing signs and floor stickers, foot traffic guides, and occupancy counters to protect employees and patrons. Shields used between workers and patrons help reduce spread providing greater personal space and put guests at ease while seated 6 feet apart. 

Changing Values and Consumer Behavior
As consumer values on cleanliness have changed, so have the marketing messages to drive traffic back in. Messages urging a date night out now tout deep cleaning of high traffic areas, upfront reservations and dedicated server staff, food runners or host cashiers to limit exposure. A “kids-eat-free” promotion is no longer as enticing when risking exposure to your kids. While most guests trust restaurant staff, they do not trust other diners.

According to a Data Essential report, COVID-19 has led to new behavior adoption, with 35% stating they have a new passion for home cooking and 51% say they would still avoid dining out. Adoption to curbside pickup or takeout technology has increased with 15% of consumers ordering takeout through an app for the first time. 44% prefer restaurants to continue to offer curbside service even after they reopen for dining in.

Adoption to New Restaurant Technology
Some restaurants inevitably will rethink their business models and technology. For some, it will be a stronger emphasis on takeout and curbside orders, which will require implementing new processes and technology for efficiency. Hospitality Technology reports 18% of consumers would prefer table-side ordering and 24% of restaurants plan to add voice-enabled ordering technology in 2020.

Operators may choose to invest in digital menu boards to notify guesting at a social distance when orders are ready while others are considering adding another WAN connection for increased digital capacity and resiliency. Some restaurants have started offering a limited menu, which can cut down on inventory costs and potential food waste. Restaurant software used to manage applications for full-service restaurants can also be used for fast casual and quick service. Investment in these waitlist management apps can track dine-in guest information, which can be essential to provide notifications in the event of virus exposure.

The recovery may be slow – IHL says it will take until 2023 to get back to pre-pandemic levels – but businesses that invest in innovation and safety have a better chance of surviving until a new “normal” is established. The need for food and what people choose to eat won’t change; how they get it probably will. How fast restaurants pivot to meet consumer behavior during the pandemic will certainly determine their survival for the future.