With close to 70% of U.S. restaurants now allowed to reopen, Americans are tiptoeing back into dining rooms. But how that pent-up demand will balance lingering Covid-19 concerns and financial worries is still unclear. David Portalatin, food analyst with NPD, a market research company based in Port Washington, N.Y., crunches the numbers and gives us his outlook.
QSR Land: So your latest report finds that 68% of restaurants are allowed to reopen, and that in the latest week, transactions at U.S. restaurant chains are down 18% year-over-year, which is a 3% improvement from last week.
David Portalatin: It’s improving every single week. That's encouraging, although we don't know yet how many restaurants will not survive. Once all the regulations are lifted and everybody's back to full capacity, we can make an assessment. My sense is that we can absorb a reduction in restaurant count and still serve consumer demand.
QSR Land: So maybe there were too many before?
Portalatin: You could make an argument that we were oversupplied with restaurant locations. Look at the rest of retail, closing doors and reducing store counts for years, even as restaurants were expanding. From an industry perspective, I think we'll be okay.
QSR Land: Some of the reason sales are down, of course, is that many restaurants haven’t reopened at all, and most aren’t at full capacity. How much of the decline indicates a shift from dining out to meals at home? Before the pandemic began, about half of the food budget was spent out of home. Are we headed back there?
Portalatin: That 50/50 split is in terms of dollars. But when we ask, 'Was that meal sourced from home or a food-service operation?’ it’s more like 80% from home and 20% from restaurants. When we look back to the last recession, between 2008 and 2012, we saw about a two percentage point shift toward meals from home. And the restaurant industry never really regained that.
People became entrenched in their efforts to save money by preparing meals at home. We could see something like that again. It all depends on how long the current disruption lasts, and how quickly things can normalize.
QSR Land: What’s your sense of that trend so far?
Portalatin: Right now, we know that in April, the American consumer increased in-home meal preparation by about 6% versus the prior year. That's much deeper than what we saw during the last recession -- and again, this year people couldn’t go out. Restaurants were closed.
I think we may not recover 100% of the customer demand, but I suspect it would be within a percentage point or two.
QSR Land: What types of restaurants are faring best?
Portalatin: Quick-service restaurants were ready-made for this. Many already had drive-through windows and websites. They had already developed apps. But I’ve been impressed by how fast all types of restaurant operators are developing new capabilities, even full-service restaurants. And while opening dining rooms is of the utmost importance to them, I think going forward, you’ll see them trying to retain that versatility.
QSR Land: How so?
Portalatin: Delivery, going forward, will continue to be so important. Consumers are going to be staying at home more. The workplace is going to be different. The need to get meals into people's homes is going to continue. So there will be more off-premise business, whether via drive-through windows, delivery or partnering with third-party platforms. Now, everything is on the table.