U.S. foodservice sales are making a faster-than-expected recovery from the COVID-19-related shutdowns, led by limited-service and quick-service restaurant (QSR) operations, with July sales down only 17.5% -- a substantial rebound from the 52% drop in April.
Rabobank reported that many large QSR operations are now reporting sales at or above year-ago levels. More interesting, the firm said, is that recent trends show that even full-service and independent fine-dining operators are posting solid recoveries.
According to the National Restaurant Assn. (NRA), consumer spending in restaurants rose for the third consecutive month in July, albeit at a much slower pace than the previous two months. Eating and drinking places posted sales of $52.5 billion on a seasonally adjusted basis in July, according to preliminary data from the U.S. Census Bureau.
Restaurant sales in July were up 5.0% from the previous month, which was substantially lower than the stronger gains registered in May (31.3%) and June (26.7%). NRA said July’s slowdown in sales growth was not surprising, as reopening plans were paused or rolled back in some parts of the country during the month.
NRA said consumer spending in restaurants continues to trend in a positive direction, despite all of the uncertainty surrounding the virus and the economy. However, July’s sales volume was still about $13 billion lower than the pre-coronavirus levels registered in January and February.
July’s sales results are a reminder that the restaurant industry’s road to recovery will be long and uneven, NRA noted.
Rabobank said the government's direct stimulus payments and higher weekly unemployment benefits appear to be supporting the recovery, which could become an issue when the benefits expire.
According to NRA, eating and drinking establishment sales levels between March and July were down more than $131 billion from expected levels, based on the unadjusted data. Add in the sharp reduction in spending at non-restaurant foodservice operations in the lodging, arts/entertainment/recreation, education, health care and retail sectors, and the total shortfall in restaurant and foodservice sales likely topped $165 billion during the last five months, the association said.
Restaurant drive-thrus proving their value
Drive-thru restaurants have always been the ultimate in convenience and speed, but during the pandemic, especially the mandated dine-in closures, drive-thrus were also a lifeline for the restaurants that had them, The NPD Group reported.
Drive-thru restaurant visits increased 26% in the April, May and June quarter and represented 42% of all restaurant visits. In July, when more restaurants were reopened, drive-thru visits still increased 13% -- the highest visit increase among the on-premises, carryout and delivery service modes, according to NPD’s daily tracking of U.S. consumer use of restaurants and other foodservice outlets.
The majority of drive-thrus are at traditional QSR chains, and although visits declined to a historical low of negative 17% during the second quarter, this segment fared far better than other restaurant categories and segments. For example, many fast-casual restaurants, which outpaced the U.S. restaurant industry in visit and unit growth for several years prior to the COVID-19 pandemic, don’t have drive-thru operations and experienced steeper declines than traditional QSRs in the second quarter, down 26%. Full-service restaurants, most of which don’t have drive-thrus and were also most affected by the mandated dine-in closures, saw traffic declines of 48% in April, May and June, although this improved to a 32% decline in July.
“Drive-thru operations are delivering a high [return on investment] during the pandemic, offering convenience, speed and the comfort of social distance to consumers using them,” said David Portalatin, NPD food industry advisor and author of Eating Patterns in America. “Fast-casual and traditional quick-service chains have already announced expansion plans for their drive-thru operations, and we will hear more chains doing the same. Drive-thru and other off-premises operations will be a major part of the U.S. restaurant industry’s recovery and future.”