This weekend brought Hurricane Irene across the Eastern seaboard, and while the storm’s force did not reach what many had expected, numerous evacuations and severe flooding was still present, leaving both analysts and the National Restaurant Association to begin assessing affects on restaurants.
The hurricane hit a 10-state swath from the North Carolina coast to New England, canceling air travel, shutting down public transportation and keeping many people indoors and many businesses closed for days.
“Early in our analysis of the weekend’s impact of Hurricane Irene, we believe several key restaurant markets were impacted either directly — stores closed due to mandatory evacuations, flooding, power outages — or indirectly — stores open, but light restaurant traffic due to ‘CNN effect,’ redirected travel plans, etc.,” Brad Ludington, a restaurant securities analyst at KeyBanc Capital Markets, said in a report Monday.
“We believe restaurants from North Carolina to the Northeast will lose a minimum of the equivalent of one day of weekend sales,” he said.
Within Ludington’s coverage universe, he cited Maryville, Tenn.-based Ruby Tuesday Inc. as one company most likely hit hard as 38 percent of the companies’ locations are located in affected areas.
Others restaurant chains cited include The Cheesecake Factory, Papa John’s, Brinker International concepts and Cracker Barrel Old Country Store.
The National Restaurant Association on Monday expressed its sympathies to those who suffered from the hurricane and applauded federal, state and local authorities for their preparedness. But the Washington, D.C.-based association also encouraged the media to report on businesses that are open and asked consumers to keep their Labor Day plans for travel and dining out.
The NRA said it understood some of its members may be left with soft sales even after a weaker-than-expected storm hit the East Coast.
“We … recognize the frustration of some restaurant communities that were not heavily impacted by Irene, but were evacuated or closed in anticipation of projected damage,” NRA president and chief executive Dawn Sweeney said in a statement. “It is not entirely possible to predict where a storm of Irene’s size will cause the most damage, and while we applaud the caution shown that undoubtedly saved lives, we sympathize with those where losses will be primarily financial.”
Sweeny encouraged travelers to maintain their summer holiday plans and visit restaurants, especially those on the East Coast that may have been shut down last weekend.
“New National Restaurant Association research indicates that 35 [percent] of consumers nationwide plan to dine out or get take-out or delivery from a restaurant for Labor Day,” she said. “As the summer of 2011 draws to a close, we hope all restaurant operators will have a record-breaking weekend.”
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Before the storm
Ahead of this weekend’s landfall of Hurricane Irene, securities analysts had predicted certain effects on restaurants, from sales declines at casual-dining restaurants to potential sales upticks at quick-service chains.
Sharon Zackfia of William Blair said in a report last Friday that casual-dining chains, such as The Cheesecake Factory and P.F. Chang’s China Bistro, are most likely to see sales dip due to the storm, while fast-casual and quick-service chains, such as Panera Bread and Chipotle Mexican Grill, may benefit, based on previous experience.
Zackfia estimates that The Cheesecake Factory has more than 20 percent of its locations in the affected areas, which will likely negatively alter her third-quarter same-store sales projections for the Calabasas Hills, Calif.-based chain by 2.5 percent to 3 percent.
Cheesecake Factory officials were not available last week to comment.
P.F. Chang’s, with an estimated 15 percent of its Bistro units and 10 percent of Pei Wei locations in the storm’s path, will likely see more modest effects, Zackfia said.
On the other hand, Zackfia said Panera Bread and Chipotle, both of which have about 20 percent of their respective units in the affected area, will likely benefit, as evacuees have been more likely to grab a quick meal during previous storms.
Irene Cook, Panera vice president of retail operations for the Eastern region, said in an email last week that coastal units have been doing everything they can to remain open, provided conditions remain safe.
“We are busy trying to arrange for refrigerated trucks where needed, that our fresh dough is being delivered as expected, and that our associates who live closer to our bakery-cafes are on stand-by if called upon,” she said. “As in the case of the many storms that our communities have endured, Panera always tries to do our best to have the hot food, welcoming environment, electrical power and means to connect to the Internet — and with neighbors — available when the community needs us most.”
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Starbucks, which Zackfia estimates has about 20 percent of its company-operated domestic units in affected states, isn’t likely to see as much impact because weekends are typically less busy, regardless of weather. In downtown Manhattan, where New York City officials were most concerned about flooding, all Starbucks were closed the entire weekend.
“In sum, we see the potential for Hurricane Irene to modestly dampen our third-quarter sales estimates for both The Cheesecake Factory and P.F. Chang’s, while potentially modestly benefitting sales at Panera Bread and Chipotle,” Zackfia wrote.
Also in a report last Friday, analyst Jeffrey Bernstein of Barclays Capital ranked the restaurant chains he covers in terms of their storm exposure risk.
“While difficult to assess the potential/ultimate damage from such a storm, we have historically seen traffic impacted from the threat of and/or unfavorable weather from storms,” he wrote.
Bernstein found Ruby Tuesday to be the chain most at risk.
Greg Ashley, a spokesman for Maryville, Tenn.-based Ruby Tuesday, said ahead of the storm that the company was preparing its restaurants for the storm’s impact, just as other businesses and home-owners are.
“At the end of the day, we don’t really know which direction it will go,” he said. “We’re planning, but not overly panicking.”
Bernstein also named Panera Bread and The Cheesecake Factory as having high exposure, as well as Outback Steakhouse and Domino’s Pizza — both of which have 25 percent of locations in the storm’s path, by his estimate.
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Tim McIntyre, Domino’s vice president of corporate communications, said last Friday that about six of the pizza chain’s coastal locations were closed for the weekend because of forced evacuations.
Elsewhere, restaurants had been preparing for the storm, ordering additional food and putting generators in place where available, he said. Additional trucks have been sent to the chain’s Connecticut supply center in the event additional deliveries are necessary.
Bad weather can benefit Domino’s when customers decide to stay in and order pizza instead of going out, McIntyre said. Domino’s philosophy during natural disasters is to “be the last one closed and the first one open.”
Many restaurants in coastal resort areas were planning to close to allow staff members to seek higher ground.
In New York, 14 BR Guest Hospitality group restaurants — including the Atlantic Grill, Blue Water Grill and Dos Caminos brands — were planning to close on Saturday. Blue Fin at the W Hotel in Times Square will remain open, said public relations manager Michelle Betrock.
“While we will make every effort to reopen as soon as safely possible, with an effort towards Sunday, no specific times have been set, as we cannot predict the effects of the storm,” she wrote in an email. “The safety of our team members and their families remains our primary concern. We also want to ensure that we are able to provide the appropriate services to our guests that they have come to expect.”
In Atlantic City, N.J., the Borgata Hotel Casino & Spa said Friday the property would close and all customers would be asked to leave by 6 p.m. The hotel was also not accepting reservations for Saturday or Sunday.
The U.S. Open, scheduled to begin its matches in Flushing Meadows, N.Y., on Monday, will also close its facility Saturday afternoon. Levy Restaurants operates concessions at the Billie Jean King Tennis Center.