The coronavirus pandemic has hit the restaurant sector particularly hard. From fast-casual to fine-dining, restaurants have had to quickly pivot from dine-in to carry-out, catering and delivery, even if it meant starting from scratch. For those businesses who were already predominantly offering these services, they have to manage the challenges of increased competition, reduced consumer traffic and staffing concerns.
Now, as states across the country begin to lift stay-at-home orders, the sector faces a new set of challenges: how to reopen. For restaurants, reopening means significant modifications to business plans, especially in the short term, as people remain wary of dining out and large social gatherings. So, what does the future of restaurants look like?
Regardless of health code or guidance, businesses will need to provide social distancing options for clients. That may mean reducing capacity by physically eliminating seating throughout the facility, or adjusting configurations to provide additional queue space for bar or light item service.
For many restaurants and bars, multiple-person groups drive a large portion of business and are integral to the ambiance, atmosphere and appeal of the concept. But large groups of diners present a unique crowd control challenge. How best to manage large group spacing and interaction with staff is a concern that will need to be addressed as part of the process to restart the business.
As restaurants think about reducing capacity to increase safety for patrons, and plan for operating under current and future guidelines, it’s not out of the realm of possibility that patrons may not be willing or even allowed to sit around in the bar areas for a drink before they are seated or while they wait for an order. For many restaurants, these types of add-on sales can significantly boost revenue and will need to be accounted for in other ways. Although, in more adventuresome jurisdictions, drinks and appetizers could be sold to customers in their cars instead of asking them to wait inside or at the bar.
“Ghost kitchens,” or commissaries, are used by restaurants as a strategy to leverage physical space, control quality for catering and event-driven sales, and eliminate the need for street presences. In urban settings, when managed well, these types of off-site operations can provide meaningful output and offer consistency of product and service. However, for restaurants aiming to grow delivery operations, it’s difficult to convert their kitchen into a commissary. Another problem is that larger locations are often in areas of retail concentration or in business districts where rent is prohibitively high and access to reasonably-priced labor is limited.
Consumers will be cautious in returning to old habits to differing degrees, and each demographic will respond to a restart differently, based on risk profile and other factors. Considering the reported rates of severe complications by age group, older guests are likely to delay heading out of their homes into public with any regularity. Families, however, may trade caution against the need for convenience, value, social events and entertainment. Young adults will likely return to normal even before the industry is ready for them to do so.
High-end, status-based concepts might rebound reasonably well. Typically, these types of places have limited seating already and are usually less impacted by recessionary trends overall. And, as destination locations, they do not rely on neighboring businesses to drive traffic.
Convenience and value concepts should rebound quite quickly. Once people are back to work, they will return to their usual routines. Depending where you live, expect your local Starbucks or Dunkin’ Donuts back up and running full speed soon. McDonald’s, Sonic, Burger King and others that rely on drive-thru, quick-service and have a large value component to their offerings should also restart quickly.
Vacation, tourism, event, and convention business-related locations should see the same type of contraction as with the 9/11 attacks and the 2008 financial crisis, as employers and associations eliminate events and families delay trips for either health or economic reasons. Unfortunately, that may mean an entire year of missed profits for seasonal destinations.
As professional leagues look into playing for TV audiences or severely limiting attendance at specific event sites, and conferences are cancelled or moved online, how will that impact revenues at locations tied to sporting, event or convention sites? The Consumer Electronics Show, for example, regularly draws crowds of 175,000 attendees and means millions of dollars for Las Vegas restaurants. Even with 2.9 million square feet of exhibition space, that’s probably not enough to keep “appropriate social distance.”
The federal government’s decision to not issue any broad ranging shelter in place edicts, but instead allow state and local governments to manage their populations, may prove problematic for companies with large footprints. How can a national chain support its locations with marketing, promotions and advertising if some states are locked down and others are open for business? How do you manage locations that might be on the border between states with different mandates? These are just two examples of questions that need to be answered. The inconsistency between states will be an operational maze for owners.
What does the pandemic mean for the rest of 2020 and the holiday season?
Not all locations are equal and not all may be able to successfully restart. Forecasting must be done on a location-by-location basis. Using a sales trend percentage across all locations might lead management down the path of reopening one too quickly, and/or overstaffing or understaffing another prematurely.
There is no one size fits all approach, but it is clear that owners across the restaurant sector will need to make difficult decisions, on a location-by-location basis. Adaptability and creativity, which has never been in short supply in the restaurant industry, will be the keys to survival.