The restaurant business has dire future prospects.
The restaurant industry has a very bad outlook. Even the most steady foodservice companies find it difficult to function in the current market environment because of the coronavirus (COVID-19) outbreak. Long-term factors that will worsen the situation include an undetermined depth of economic depression and future COVID-19 outbreaks, which are anticipated to happen this fall or next spring.
The immediate effects are powerfully illustrated by data from The NPD Group, Chicago. Full-service restaurant transactions decreased by 79% for the week ending March 29, while overall restaurant transactions decreased by 42%. The world’s biggest fast-food restaurant business, McDonald’s Corp., reported a 22% decrease in sales in March 2020 when compared to the first two months of the year.
According to the National Restaurant Association, the restaurant industry will lose between 5 and 7 million jobs and around $225 billion in sales because 97% of American restaurants are subject to some kind of regulation. The numbers are predicated on the idea that the outbreak’s impacts will subside in a few months and that the US economy will then return to normal.
Sadly, until a vaccine is created, COVID-19 is expected to recur frequently, necessitating action from public health organizations to stop its spread. Getting past the present outbreak is not the end, according to Anthony Fauci, MD, head of the National Institute of Allergy and Infectious Diseases within the National Institutes of Health, and other public health experts. Communities will need to get ready for the possibility of a revival. These preparations could involve social isolation and limitations on the operations of eateries and other businesses.
For owners of restaurants, this possibility is disastrous. Few companies are able to recover and grow in the face of such an imminent danger. Although operators would be eligible for stimulus monies from the federal government, the longer term problem facing the business is more significant. Who would lend money or make an investment in a business area that might have frequent shutdowns every few months?
There will be equal pressure on a large number of food and beverage manufacturers who supply the restaurant industry. There will be serious repercussions throughout the foodservice supply chain.
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The total industry transactions by the NPD Group compared to full-service restaurant statistics do show which restaurant business models are more appropriate for the current climate than others. Better positioned to withstand the storm are those who have efficient drive-thru, carryout, and delivery operations than others. Grocery products are another way that some chains are adjusting. In addition to their conventional prepared meals, Panera Bread and Subway also sell basic groceries including bread, milk, and meat.
Operators will have to devise strategies that open up new revenue streams by imitating Panera Bread and Subway. The businesses with the most established drive-thru, takeaway, and delivery operations and the most easily accessible real estate will stand to gain the most. The future is even more dubious for restaurants connected to shopping centers, commercial areas, and entertainment venues.
70% of industry traffic is made up of major restaurant chains, according to the NPD Group. The majority of the remainder are independents and small chains. As the country and the rest of the world struggle with the devastation caused by the COVID-19 pandemic, the smaller chains and independent businesses are most at risk.