U.S. Foodservice Industry Reels from Seismic Changes Due to COVID-19 Pandemic

restaurant interior
stock image

By Rosanna Caira, Editor & Publisher, Foodservice and Hospitality magazine

As the COVID-19 crisis continues to worsen around the world, economies continue to feel the devastation. In the U.S., the pandemic has taken its toll on the number of restaurant closures and layoffs.  In a webinar called “State of Our Industry: A discussion of the current restaurant landscape,” held last week, organized by Technomic and sponsored by Unilever, Joe Pawlak, managing principal, Technomic, spoke about the seismic changes being felt across all segments of the industry south of the border.

Pawlak began the webinar by providing a birds-eye view of the industry in 2019. “If you look at the past five years, you’ll see that [in] the Top-500 chains, unit growth decelerated since 2015. While we’re seeing growth in sales of 4.1 per cent, it’s not coming from new units…it’s come from menu price increases and premiumization.”  

He then jumped into the current impact of the health crisis, citing statistics from the National Restaurant Association (NRA), which show that in a matter of weeks, the pandemic has caused three per cent of restaurants (21,000 units) to close permanently, with 11-per-cent more in the past 30 days. A total of three million jobs have been lost, with 70 per cent of the industry’s labour force either laid off or had their hours reduced. An additional 50 per cent of workers are expected to be laid off. The news has been impactful on all levels, with Technomic estimating 86 per cent of operators are seeing sales and traffic declines. All told, there’s been a 45-per-cent decline in average consumer spending. As expected, the economic picture during this time is bleak, with GDP dropping in the first quarter by 1.8 per cent and 15.3 per cent in second quarter. The unemployment rate in the U.S. has grown to 7.4 per cent.

While Pawlak says “it’s too early” to tell how long this situation will continue and notes the impact will be different depending on which models you look at, what can be seen is that “Takeout is becoming more prominent as well as delivery, both for casual and QSR as consumers are increasingly staying at home.” Pawlak adds “Working at home is having a big effect on our industry,” with more than double the number of people working at home since the Coronavirus situation has taken effect. “It’s grown from 18 per cent to 26 per cent,” says Pawlak, adding this shift “has caused stress at lunch and breakfast dayparts.”

Interestingly, during this downturn, many operators have been forced to pivot to takeout and delivery due to continuing restrictions on social distancing. While casual dining has shown the most significant losses during this time, operators who have turned to takeout have shown increases. It’s also forced operators to get more creative with a number of initiatives being taken to offset the losses. These initiatives have ranged from menu adjustments, royalty relief, added curbside service, the introduction of adult-beverage delivery and component meal kits, to name a few. 

To summarize, while no one can predict how long this health crisis will last, Pawlak highlights three scenarios moving forward. The short-term scenario will see new COVID-19 cases plateau and decline start happening in the second quarter with dining-in restrictions lifted in mid- to late-Q2. A mild resulting recession is foreseen for the remainder of the year. In the mid-term scenario, Technomic predicts new COVID-19 cases will plateau and decline beginning in late Q2 and early Q3, with home and dining restrictions lifted in Q3 and the economy stuck in a mild recession for the remainder of the year. Finally, a longer-term scenario would see the first wave of COVID-19 cases plateau and decline beginning in late Q2 and early Q3; home and dining-in restrictions lifted in Q3; and a second wave of COVID-19 cases appearing in Q4 with a recession for the remainder of the year. 

Regardless which scenario plays out, the impact to the industry is devastating and the effects will be felt for a long time. But Technomic does believe pent-up demand will drive a short-term bump. Still, Pawlak says we can expect the possibility of fewer restaurants, short-term industry contraction with longer-term return to pre-COVID-19 levels, and he adds, it’s possible the new normal will also see less direct customer interaction, a stronger focus on sanitation, the expectation for free delivery and more off-premise dining.

Previous articleWebinar Addresses Impact of COVID-19 on Canadian Foodservice
Next articleFoodservice Operators Turn to Takeout and Delivery to Deal with Fallout of Health Crisis
Rosanna Caira is the editor and publisher of Kostuch Media’s Foodservice and Hospitality, and Hotelier magazines. In her capacity as editor of Canada’s two leading hospitality publications, Rosanna directs the editorial and graphic content of both publications, and is responsible for the editorial vision of the magazines, its five websites as well as the varied tertiary products including e-newsletters, supplements and special projects. In addition to her editorial duties, Rosanna also serves as publisher of the company, directing the strategic development of the Sales and Marketing, Production and Circulation departments. Rosanna is the face of the magazines, representing the publications at industry functions and speaking engagements. She serves on various committees and Boards, including the Board of Directors of the Canadian Hospitality Foundation. She is a recipient of the Ontario Hostelry’s Gold Award in the media category. In 2006, Rosanna was voted one of the 32 most successful women of Italian heritage in Canada. Rosanna is a graduate of Toronto’s York University, where she obtained a BA degree in English literature.

This site uses Akismet to reduce spam. Learn how your comment data is processed.