Restaurants Need to Pivot Again
I dislike being the bearer of bad news, but if you are operating restaurants, you may have to plan for a pivot to live with less sales than you had last quarter. Not everyone are seeing sales declines, but on average sales for the industry are declining.
Sales relative to the same day last year, have been declining since the end of September, at least as measured by Mirus Index. There are two reasons why sales are heading in the wrong direction; first, many cities and states are reimposing restaurant shutdowns, and second, last December and January were the best months for sales in years, so we are comparing to relatively high levels.
This chart compares each month to the same month a year ago on a same-store basis. At this point in December, we are experiencing sales performance similar to June or July, wiping out the gains achieved in the 3rd quarter. If you have been forecasting a continuation of improving sales performance, you should rethink your assumptions.
We also see all segments of the industry being affected, albeit QSR is less affected than other segments. The chart below illustrates the trends by segment since late September. Clearly, Casual dining formats are being hit the hardest but the downward trend is evident for all segments.
A favorable impact from the initial vaccinations should be expected eventually, but it may be as late as the 2nd quarter of 2021. While restaurants have to operate without dining rooms and bars, the numbers will struggle to improve. Even if those restrictions are lifted by the end of 2020, the strong numbers from last January and February will make it difficult to catch up.
Eventually, we will get to March and the winds will shift and it will make it easier to achieve sales growth due to the massive decline in restaurant sales during the first weeks of Covid. In the meantime, be cautious when projecting customer traffic or sales.
You can see more about the impact of Covid on restaurants here.
Financial Advisor serving individual investors and business, with specific focus to serve women.
3yIt is tragic to see the devastation of our industry, especially those small independents that are struggling to survive and to see those who have had to shut their doors.
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3yNot only restaurants but all businesses whose pivot is not working. The answer? Pivot again.