Restaurants' Recovery Pauses Amid COVID-19 Surges, Canceled Re-Openings

A steady rebound in restaurant consumer transactions has hit a six-week wall as COVID-19 surges and accompanying reopening rollbacks stall any recovery, according to The NPD Group Inc.

Since the second week of June, major restaurant chain customer transactions fell between -11% and -14% when compared to last year, according to NPD. Its findings were based on chain-specific transactions and share trends for 75 quick service, fast casual, midscale and casual dining chains, which represents 53% of U.S. commercial restaurant traffic.

To be sure, NPD did note earlier an steady improvement in major restaurant customer transactions stretching from the last week of April through the second week of June. By the week ending July 12, consumer transactions were down -14% compared to a year ago. The following week ending on July 19 saw a slight improvement with transactions only down -12% compared to a year ago.

In the week ending July 19, quick service restaurant chains were responsible for improving customer transaction figures from the previous week, NPD wrote. Quick service restaurant chains’ transactions were only down -11% year-over-year that week. While full service restaurants’ transactions were down -27% year-over-year, those figures would be in a worse position without full service restaurants’ significant shift to off-premises services, NPD noted. In June, full service restaurants’ off-premises traffic grew 91% compared to a year ago and on-premises traffic declined -62%.

The NPD noted some full service restaurants aren’t waiting for mandates and coronavirus-related reluctance to ease before shifting service delivery.

“Certainly full service restaurants need to recover their lost on-premises business since that will always be their main source of volume,” said NPD food industry adviser David Portalatin in a prepared statement. “But, I wouldn’t be surprised to see new casual dining models emerge that are designed to optimize off-premises capabilities for the long term.”

Capacity restrictions are significant factors driving the decline in customer transactions, NPD wrote. In the week ending July 19, 78% of restaurants were based in areas that permitted on-premises dining but with varying capacity restrictions. Notably, California is home to 13% of the country’s restaurants but is currently prohibiting on-premises dining, NPD added.

For most US restaurants, they are operating “well below” normal capacities partly fueled by the pandemic and difficulty attracting labor, NPD wrote. But consumers’ spending habits will dictate how restaurants operate.

“The ‘recovery’ phase will then tell us whether the industry can recapture enough customer traffic to get back to the pre-COVID baseline, or whether the new normal will reflect a reset where consumers prepare more meals in their home kitchens for a longer term,” Portalatin said.