Data from tracking services and US Foods suggest a November slowdown, but takeout remains strong as operators have adapted, says RB’s The Bottom Line. 
Restaurant sales

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The Bottom Line

Restaurant sales have slowed considerably throughout November as a surging virus, government shutdowns and cooler weather have all conspired to keep people from dine-in service.

This is unsurprising and could portend to a long winter for concepts dependent on that dine-in service for their survival. It could put more pressure on decision-makers either to loosen restrictions or find a way to support operators whose sales have been hammered as a result of the pandemic.

But other evidence suggests a consumer that has largely adapted to dining out during a pandemic. While full-service sales have slumped, fast-food sales remain fine. Many operators have also adapted themselves to this reality and appear more prepared this time around.

“We all know that being a restaurant is a tough business in any environment,” Dirk Locascio, CFO at US Foods Holding Corp., told investors earlier this week, according to a transcript on the financial services site Sentieo.

“And they’re learning to be more resilient and adapt, whether it’s labor staffing, investing in more capabilities to do delivery and carryout. It may not get them to the levels they were at before, but it allows their business just to continue to survive and be cashflow positive in some cases.”

Still, the new surge is slowing the recovery. US Foods this week said its restaurant case volume has slowed in the second half of November as the virus spreads and states close off dine-in service.

That has also slowed holiday parties and other events that traditionally carry restaurants through the season.

Other data reveal similar trends. According to data from the software company Crunchtime, total restaurant sales slowed from 83% of year-ago levels in early October to 80% in the first half of November.

But full-service restaurants slowed considerably, from 78% in early October—a post-pandemic high—to 67% the week ended Nov. 22.

Data from OpenTable also shows a slowdown in the second half of November. Seated diners through the service was down 55.6% in the second half of November, from a decline of 47.5% in the first half of the month and a decline of 41% in October.

According to Black Box Intelligence, industry same-store sales declined 10.3% in November, the worst result for that index since August. 

Other concepts, unsurprisingly, have fared better. Fast-casual sales were down just 2% in the week ended Nov. 22, according to Crunchtime, while quick-service restaurant sales were down 1%, according to the company, which bases its benchmark on its customers’ sales.

The surge in the virus and state shutdowns have shed another light on concerns about the independent restaurant, in particular, which doesn’t have the access to capital and ability to access technology that have carried chains during the past nine months. Many of these restaurants fear they may not make it until the vaccine begins to deploy next year.

US Foods has estimated permanent closures among independent restaurants to be in the mid-single digits—or about 5% of independent operators. If that’s the case that ultimately will be better than most anticipated back in March.

What’s more, Locascio said, demand for independent restaurants was strong before the pandemic and should be strong afterwards, too. “Even if you have some closures, it doesn’t mean the demand likely goes away as opposed to returning over time as people eat there,” he said. “So expect independents to remain strong over the longer term. It could look a little different with the specific operators over that time, but we feel very good about independents over time.”