Impact Report July 31, 2020

COVID-19 cases are still on the rise, and some areas are adding more restrictions to social gatherings due to the influx.

We will continue to help our clients navigate this ever-changing environment with restaurant data and consumer insights that allow them to make the best decisions for their brands. To help guide our clients this week, we have collected the following information for your consideration as of Friday, July 31:

Overview

Despite COVID-19 cases rising, data for the week ending July 19, 2020, shows restaurant trends in most areas of the world continuing to stabilize and even show some improvements. The US continues to show traffic down between 10% and 15% for the fifth week in a row. Asia continues to stay stable at negative 20% to 25% while the Middle East/Africa continues to rise with YOY traffic between negative 15% and 20%. Europe saw its second week of increases, with traffic moving up negative 25% to 30%.

For the US

QSR v. TSR

QSR traffic remained the same as the prior week for both sales and traffic. Traffic is between negative 10% and 15% YOY, while sales is still neutral-positive YOY at 0% to 5%.

  • Drive-thru continues to outperform other areas in the QSR restaurants, with YOY traffic continuing to show positive 15% to 20%, and YOY sales showing positive in the 35% to 40% range.
  • Dine-in continues to trend negatively over the past few weeks. Traffic and sales are within the range of negative 65% and 70%.

TSR continues to lag behind QSR and has dropped further as some restaurants are forced to continue limiting capacity due to rising COVID-19 cases. This week is showing a drop back to a negative 35% to 40% for both YOY sales and traffic.

  • Delivery and to-go meals increased again this week, while dine-in again decreased. Delivery and to-go are still showing significant growth (around 100%) compared to the prior year.
  • Dine-in traffic and sales dropped back to their lowest point since early June. YOY traffic and sales figures both show down between 55% and 60%.

Regional / Category

  • Mountain, East South Central and West North Central performed best this week with sales ranging between 0% and +5% and traffic between negative 5% and 15%.
  • Coastal divisions (New England, Middle Atlantic, Pacific and South Atlantic) continue to show the most negative impact, with traffic declines of 10% to 15% YOY and sales also between -5% and +5%.

For Europe

YOY trends show a second week of positive growth, with traffic increasing to negative 25% to 30% and YOY sales trending at neutral-negative 0% to 5% YOY.

For Asia

YOY overall traffic maintained between negative 20% to 25%. YOY sales also remained similar to the prior week between negative 25% and 30%.

For Middle East/Africa

This week continues positive momentum for the Middle East/Africa region. YOY traffic ended between negative 15% and 20% and sales neutral-positive between 0% and 5%.

Outlook

Continued Increase in Business Requirements

Masks, particularly in the US, have been a divisive issue. With each passing week, more and more businesses have made the decision to require guests to wear masks as a part of normal business operations, even where they are not required by law. In other parts of the world, restaurants continue to take precautions. When we spoke to our correspondents in Asia, Winny Daud and Cathy Ko, they informed us that dine-in is still limited to five individuals per table. Contact tracking has been implemented by checking in guests using QR codes. To read more about the current restaurant dining situation in Asia, take a look at our latest blog.

Continued Market Contraction

With the potential for slower growth in certain segments and additional issues, such as continued capacity restrictions in many areas with COVID spread, predictions for general restaurant contraction continue to be alarming. End figures of potential restaurant closures are at best speculative, but as additional headwinds have developed, Yelp recently reported that approximately 60% or more of units that have closed may never open to service again. The changes this will bring to the restaurant landscape as a whole (both in options available to guests and the resulting competitive landscape of those that remain) could have resounding effects across all aspects of the business.

Pricing Activity

Potential Onset of Delivery Premiums

Menu pricing has been an expected result of rising costs as restaurants deal with post-COVID-19 headwinds. One topic mentioned in last week’s report was the potential of adding surcharges at a restaurant level before including additional third-party charges. In recent weeks, some price increases have been observed, ranging from an additional 10% to even above 20%. With delivery staying strong even post-market re-openings, there should be an expectation to see possible premiums added in more instances. Our latest insights have shown that customers are more aware that prices will increase and are likely to continue to do so for some time. When we asked US consumers their thoughts on pricing, 79% believed prices would increase as a result of COVID. To learn more about attitudes toward pricing, take a look at our consumer insight reports.

Industry Strategy

Smaller Footprint, Changing Restaurant Models

With all of the changes brought about as a result of COVID-19, there is speculation that QSR restaurant structures and designs might also need to change to keep up with a flexible future. Some of these changes include smaller interior spaces geared more toward carryout/delivery and additional drive-thru capacity focused on efficiency. Non-QSR is also not immune to potential changes. The increased needs of off-premise dining (and more adjustable dining spaces) may cause many restaurants to rethink their current structural plans.

We realize these are stressful and unprecedented times. RMS is here for you. Reach out to us today if you are looking for practical recovery strategies designed to optimize menu profitability, sales and financial profitability that can be implemented by operators immediately.

Let’s start your recovery strategy

Now, more than ever, RMS is committed to doing all we can to support the restaurant industry. Our team of experts is ready to help put you on a path toward profitability.