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Below is a brief excerpt from a complementary research note written by our Consumer Staples analysts Howard Penney and Daniel BiolsiWe are pleased to announce our new Sector Pro Product Consumables Pro. Click HERE to learn more.

How Many Restaurants Will Close Due To Covid-19?  - 9 18 2020 9 16 25 AM

The National Restaurant Association says 40% of operators aren’t sure they will make it six more months.

The restaurant association released a new survey this week that found nearly one in six restaurants, or 100,000 units, closed either permanently or long term. The Association said consumer spending in restaurants was down 34% on average.

According to Black Box, comp sales for chain restaurants declined 12.3% in August, with traffic down 17.7%. QSRs are significantly outperforming full-service restaurants, and sit-down chains are recovering faster than independents.

According to Revenue Management Solutions, traffic declined 10-15% at counter service restaurants with sales flat to down 5% while full-service transactions are down 30-35%.

It’s essential to keep in mind the Association and its members are also asking for more legislative assistance, so dire forecasts for the industry are somewhat self-serving. According to Womply, a CRM provider to local restaurants, the closure rate (the percentage no longer processing transactions) for local QSRs has been about 18% since June, as seen in the following chart.

How Many Restaurants Will Close Due To Covid-19?  - be1

The closure rate for sit-down restaurants has increased slightly since the end of June but has been at 23% since August.  

The closure rate for bars/lounges has increased since the end of June to 38%. With so many restaurants not currently open, it does provide a boost for the open restaurants. According to Womply, sales at all local restaurants were down 47% on September 4 while sales at open restaurants were down a much more modest 8.1%, as seen in the following charts.

The reward for persevering through the pandemic will likely be a less competitive environment, which the larger chains are better positioned for.

How Many Restaurants Will Close Due To Covid-19?  - be2