Getting Personal with Email

Post written by: Chris Miller

Jayne Strickland, SVP Analytics Services
Ted Babcock, VP Analytics Services
Leaders of Fishbowl’s Consumer Research, Menu Optimization, and Pricing Analytics Practices
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How and when will we emerge from the COVID-19 downturn and begin to drive recovery? Published estimates on re-entry are fluid, and timing for each state to enter the recently-announced phases of recovery will vary widely. We face continued health and economic insecurity. The Federal Government approved an economic stimulus unprecedented in scope with measures intended to soften the near-term blow to many workers and businesses. While these measures are critical to supporting many of those most affected during the downturn, some have proven to be insufficient and the full duration of the downturn is still unclear.
Restaurant Declines are Deep and Wide
The current recession is unlike those of the past. The driving force is a global health crisis and the impact has been far more sudden, steep, and far reaching. In early March, we saw the first negative reports from Seattle with 10% declines in comp dine-in traffic and fine dine and upscale casual down by 30%. This was followed by a severe drop in the weeks following.  The week ending March 29 saw transactions drop 40% year-over-year in quick service and 79% in full-service restaurants.  Concepts previously reliant on drive-thru, take-out, and delivery suffered less severe declines. Across the industry, some chain operators closed select, or in some cases all, locations. It does appear there has been some stabilization in recent weeks but at unprecedented lows.
As in past recessions, we are already seeing consumers migrate to value-oriented spending and brands. “When consumers’ incomes go down, they can either substitute cheaper goods or buy fewer items.” This is why we see the QSR segment fairing a bit better due to lower price points, as well as having the menu and delivery mechanism predisposed to off-premise. The higher income demographic has seen the biggest drop in restaurant spending because they were eating out more often and frequenting higher end establishments, which tend to be those with full closures.
The Industry is Adapting
Restaurants have quickly repositioned business models, menus, service modes, engagement strategies, and promotions.  Some have modified their concepts to emulate grocers, while others have developed meal kits akin to those offered by Blue Apron or Hello Fresh. They have created make-shift drive-thrus, added curbside pick-up, or expanded delivery services. Technology is quickly enabling online ordering and delivery channels. We are seeing increased frequency of messaging through emails (check our biweekly blog for latest tips), online, mobile platforms, and SMS messaging.  Operators have upped community support with free or discounted meals to healthcare workers, first responders, or their at-risk communities. Some have limited their menus to items best suited for take-out and delivery, or developed bundles merchandised as family meals. This abrupt metamorphosis reveals new solutions that may very likely have a lasting influence on future business models and consumer expectations. These quick-turn innovations and lessons-learned are likely to find a permanent place in the industry.
Restaurant Penetration, Unemployment Will Change the Trade Area Landscape
In past recessions, we saw large numbers of restaurants close due to poor economics; however, the last recession was preceded by an overdevelopment of restaurants.  While restaurant development has been more disciplined in the most recent two years, the duration of this financial impact will potentially cause larger numbers of locations to no longer be viable. It is likely a significant number of locations will not recover, and thus the impact on local economies will vary greatly.  Some trade areas will rebound quickly; some won’t.  Restaurants that can sustain the short-term loss (with nimble re-positioning and/or cash reserves) will have a larger slice of the consumer pie and rebound well. Unemployment, bankruptcy, debt burdens, and a generally lower standard of living will hit certain areas harder than others. On the flip side, there may be a segment of the population that will have pent up demand, if they were able to retain their jobs, and thus have more available spending.
Recovery Will Not be Uniform Across the Country
Areas of the country and businesses will emerge at different times and in different ways. The easing of restrictions is not likely to be widespread or even begin until the availability of mass testing, contact tracing, therapeutic treatments, and a vaccine. Lifting of local governmental stay-at-home or shelter-in-place orders will likely be done in a limited fashion and in stages. Public health officials will need a much better view of the spread of the infection within communities; rapid ways to identify, trace and quarantine; and access to antivirals to treat serious cases before orders are given to lift social distancing restrictions.