Restaurant Industry after Covid-19

Activities that people took for granted, like eating out in a restaurant, have become so valuable, thanks to COVID-19. The pandemic has stunned the entire global economy, leaving an indelible mark on all sectors, more so the restaurant industry. These impacts may last past the pandemic; thus, restaurants must embrace creative ideas to stay afloat. Remarkably, some of these changes are positive as discussed herein.

How COVID-19 Will Remake the Restaurant Industry  

Change in Consumer Behaviour

The measures undertaken by authorities to curb COVID-19 and social distancing have significantly changed consumer behavior. Unlike in the pre-pandemic era, consumers no longer frequent their favorite indoor and outdoor events, such as sports events and night outs. These measures have left a long-lasting mark on the restaurant industry’s structure, which could prove challenging to erase long after the pandemic.

The major challenge attributed to COVID-19 is the uncertainty in consumer behavior post-pandemic. While some consumers may opt to embrace “normalcy” immediately after reopening restaurants, others would still be pessimistic and cautious. An interesting observation is that consumers would tend to get accustomed to the changes brought about by COVID-19, especially when the pandemic lasts long. Notably, they are likely to continue online food delivery and increased consumption of food at home in the attempt to stay away from possible infection.

Working from home

As a result of COVID-19 and the associated measures to curb its spread, consumers have shifted when and how often they spend on restaurant food. The U.S. Bureau of Labor Statistics estimates that the number of people working from home has increased by nearly 50% compared to the pre-pandemic era. This trend is likely to continue into the post-pandemic and may have unprecedented ramifications. For instance, families may opt to spend their weekends at home rather than visit restaurants for dinner or coffee. The demand for weekday lunch and breakfast would decline sharply due to the measures attributed to COVID-19, especially IN locations with dense populations.

Increased Consumer Spending on Groceries

Despite fewer trips due to COVID-19,  there is a rise in consumer spending on groceries now compared to the pre-pandemic era. Before the pandemic in 2015, consumers spent 53% of their food budget on restaurants and 47% on food at home. This trend seems to have flipped as a result of the pandemic. In the U.S., for instance, the average weekly grocery shopping rose by 17% since the onset of the pandemic. We anticipate this trend to continue in 2021 and the better part of 2022 before consumers can reconsider spending on restaurants. However, the food-at-home spend may persist even then, partly due to the increased efficiency and convenience in grocery delivery.

Source: U.S. Census Bureau, Haver, Morgan Stanley Research estimates.

Digital Transformation

While these changes are mostly painful, like real estate transition, the restaurant industry may experience positive changes accruing from the COVID-19 pandemic. The acceleration of digital transformation and growth in market share opportunities are typical examples of the restaurant industry’s positive changes after the COVID-19. Consumers across the world are engaging more on food-at-home since the pandemic and reducing out-of-home activities. The food industry has witnessed a 30% growth in online customers, a remarkable digital shift that may persist after COVID-19. However, China has reported a moderate growth in online customers, perhaps attributed to the high level of online penetration before the pandemic.

The restaurant industry is adjusting to these consumer behavior changes through various means, including outdoor dining, food delivery apps, and curbside pick-up. However, will restaurants fully regain the pre-pandemic status after the global vaccination campaign?

Real-Estate Shake-up 

As consumers shift to online food delivery and at-home-food, restaurants have no option but to adapt to survive and remain profitable. Such changes in investment would include prioritizing pick-up windows or drive-through options while constructing restaurants.

Store footprints of restaurant chains are likely to suffice as brands attempt to adopt post-COVID-19 recovery strategies. Brands may consider merging two or more entities under one roof. Curbside pick-up windows would become more relevant due to the digital shift.  Consequently, the current restaurant sites are likely to shrink or be vacated in the attempt to consolidate the otherwise razor-thin profit margin associated with the industry.

Consolidation of the Restaurant Chains

As COVID-19 causes havoc across industries globally, small brands remain the worst hit, and the food sector is no exception. Interestingly, the world was home to hundreds of thousands of restaurants. There were approximately 370,000 restaurants, constituting slightly more than half the total number of independent restaurants globally.

However, it is estimated that up to 30% of these restaurants could close permanently due to the pandemic. The closure would have a detrimental effect on the global economy from two main perspectives. Notably, such businesses will be up for sale, and the employees will lose their jobs.

Job Losses

Rather than creating the projected 15.6 million jobs in 2020, the restaurant industry has experienced unprecedented job losses like never before, thanks to COVID-19. According to the National Restaurant Association, COVID-19 caused nearly 2.5 million job losses last year, with a $240 billion decline in industry sales down from the anticipated $899 billion from the pre-pandemic levels. More than 110,000 restaurants closed either temporarily or permanently across the U.S. in 2020.

The permanent closure of thousands of restaurants in 2020 caused massive job losses across the globe. Some of these business ventures and eateries have existed for two decades or so and have employed an average of 32 people. Almost 17% of thee eateries employed at least 50 people before their closure. Unfortunately, only a meager 30% of restaurant owners that closed for good may consider reopening, painting a bleaker picture of the job prospects in this industry and those who depend on it. Even then, less than half of the restaurant owners are willing to stay in this industry, an issue attributed to its vulnerability to such unforeseen calamities and economic disruptions.

Even so, the restaurant industry has proven resilient in the past, particularly its ability to recover from financial challenges. One primary reason behind their persistence is that eateries have sites that preserve high sunken costs and do not require huge capital to reopen. Such sites include high-volume air conditioning, plumbing, among other specialized kitchen facilities. Thus, new operators would find it easy to open their restaurants as adapting would not be a significant challenge.

Take Away

COVID-19 has created havoc in the restaurant industry, leading to job and financial losses, uncertainty in consumer behavior, and real estate shake-up. These changes are likely to last past the pandemic era, an issue that the restaurant industry must confront. While some of these changes are agonizing, there is a flipside to COVID-19, such as digital shift and remote work.

In the wake of the above challenges, restaurants must embrace innovative ideas to stay afloat after the COVID-19 pandemic. They should go above and beyond to not only expand their existing takeout options but also consider other related ventures, such as investing in grocery stores. Interestingly, some restaurants have embarked on creative strategies to remain profitable during and after the pandemic, including altering their menus. These strategies rely on critical findings, which associate increased on-premises dining and takeout with consumer needs and comfort.

Featured photo create by master1305 –

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