As we alluded to in last week’s post, the COVID-19 restaurant recovery has been incredibly unequal. In fact, even using the word recovery feels wrong, given how some brands so quickly saw sales rise to historic levels, while others still see no signs of recovery. But overall, the industry appears on the path to recovery.
In practically every way we can divide restaurants, there are differences in how the pandemic impacted sales. Chains vs. independents. Urban concepts vs. suburban ones. Limited service vs. full service restaurants. You could even add in daypart focus, as well.
These trends are pushing the industry toward factors that are favorable now – it’s how brands expect to make it through alive. This means more drive-thrus, more curbside service, more delivery and more suburban locations. It will likely also mean more chains and fewer independents.
In my opinion, it’s not worth discussing whether these trends are ‘here to stay’. Especially in the case of off-premise amenities like delivery, drive-thrus and curbside, each of these was an important part of the industry before the coronavirus and will be afterwards.
That said, perhaps the better discussion is on supply and demand.
In other words, we know these amenities will be a part of the industry going forward. But how much of industry sales will run through these channels, and how will that compare to the number of operators offering these services? That depends on the return on dine-in, which over years may be able to earn back a notable share of restaurant occasions. It certainly won’t surpass takeout, though dine-in sales were much larger than third-party delivery sales pre-pandemic, granted third-party delivery was growing much faster. But while dine-in may never regain the share of occasions it had in the past, its still likely that the return on dine-in (fully - when we have a vaccine and consumers feel safe dining out) will impact demand for takeout and delivery. Even if that just means off-premise demand starts growing at a slower rate than it has been.
If the brands that make it through the pandemic are those that successfully pivoted to off-premise, that would suggest that the American restaurant landscape would likely have a notable supply of takeout and delivery focused restaurants. This mirrors demands right now: there’s a lot of off-premise demand, and not much for dine-in.
So, will consumer demand support an increase in the number of to-go focused restaurants? Or will the off-premise market become over-saturated as seemingly all restaurants, new and existing, target takeout and delivery?
It’s possible, if not probable, that the answer to both questions is yes for the foreseeable future. Consumer usage of off-premise channels will most likely grow beyond the pandemic, providing substantial opportunities for operators. But the availability of off-premise options will also grow. In fact, it seems that off-premise options are growing notably fast given the rise of virtual brands and ghost kitchens. It feels like every time I read about the closure of a well-known independent, I read about a chain debuting virtual brands or signing on for ghost kitchens. Most also involve chicken wings.
But neither supply nor demand can grow forever.