As the U.S. House of Representatives works to advance its $1.9 trillion coronavirus relief package, it’s safe to say that the bill’s passage would positively impact restaurant sales. After all, if passed, the bill would grant individuals up to $1,400 directly and families of four up to $5,600. But how positively would it affect sales; for how long; and for which restaurants?
At RMS, our analysts spend their days getting to the bottom of important questions like these, using proprietary methods to analyze and model data from a range of sources. Their short answer to these questions? It’s complicated.
The government’s most recent stimulus aid package in December certainly affected sales and traffic, but not for all types of restaurants and not in all regions. Based on our data, we saw a potential lift ranging from about 3% to 12%. One client in the QSR segment, for example, saw sales increase by 12.9% for the period Dec. 29-Jan. 4, with traffic up by 8.7%.
Yet if we take a deeper look, we see that many factors may have contributed to this change in consumer behavior. Restaurants usually see a lift over the holidays — the period the aid was distributed — yet we were also facing a contentious political climate and an ongoing general sense of uncertainty. States, counties and cities were implementing differing policies and mandates, such as capacity restrictions or closures. And of course: COVID-19.
Could the 3-to-12% lift have been higher, had COVID cases not spiked after Thanksgiving? Will the next round of stimulus be distributed in a more certain political environment, but during a lull in normal restaurant traffic driven by the seasons, weather or lack of major holidays? Or will it come at just the right time and drive sales higher? All these questions impact a brand’s ability to sell its product and must be taken into consideration when predicting the impact of an economic stimulus package — or any other factor.
Joel Davis, RMS Chief Strategy Officer, has a doctorate in these matters. Here, he lays out the short list of factors he and his team are analyzing to calculate the impact of a past or future stimulus package on a brand’s performance.
1. Performance trends
Historical data on the size and number of transactions during a certain period is an obvious source for answers. Davis says the biggest challenge in these times is the availability of similar data. “We don’t have a late December or January period to look at that is LIKE 2020. Because, well, pandemic.”
Instead, his team looks at more near-term data, with a “shorter half-life,” as Davis calls it. He explains: “We can look at daily sales for the weeks prior to the stimulus package. Most of our clients did see a lift week over week. While this doesn’t indicate a causal relationship to the stimulus, it does guide our thinking.”
2. State, county and local COVID policies
“Our analysts found that local policies had a much bigger impact on a brand’s performance than the stimulus checks,” says Davis. For example, a brand with many locations in California had a worse performance than a brand with most units in Florida, where most restaurants were open when consumers received their stimulus checks.
It’s difficult to predict what restrictions will look like if and when the stimulus package is distributed. There’s no solid baseline because, throughout 2020, state, county and city guidelines ranged widely and changed quickly.
Brands with robust drive-thru or pickup traffic will likely do well no matter what the environment. But consumer wariness or outright closures will affect whether guests are even able to spend a stimulus check.
The timing of the holidays, the weather, political unease, economic concerns: These all make up a customer’s environment and can affect a decision to visit a restaurant. In December, they all collided with the stimulus check arrival. The good news: many of these factors may not play a role in the arrival of the next stimulus checks. Or they might.
As we said, it’s complicated.
RMS also looks at the timing of when a stimulus check might get spent, which is not necessarily when it arrives in the mail.
Davis explains, “For consumers, even before a check arrives, their expectations and behaviors change. If someone believes they will get a check the following week, some consumers may spend money in anticipation of the financial windfall, while others might spend weeks or even months after the check arrives.” These two completely opposing possibilities require completely different approaches.
At RMS, “when we model, we look at all scenarios and use multiple treatment dates,” explains Davis. “The impact of the stimulus check is not necessarily fully realized when the check arrives. The impact is spread across different tangible (depositing the check) and psychological (‘I am going to be rich!’) events.”
In the end, says Davis, “any economic relief, whether in the form of a stimulus check or other financial assistance, is likely to be a boon not just to individuals but restaurants as well,” says Davis. “Yet, when there are so many contributing factors and little historical data, the path forward can be nuanced.”