The spread of COVID-19 over the last few months — and the social distancing and shuttered dining rooms that followed — have slashed restaurant sales in all corners of the industry. But the situation has cut some brands much deeper than others.
Within that negative overall picture, there are clear haves and have-nots. Analysis of recently released same-store sales results reveal those that fared better had a few things in common: drive-thrus, core menu items foods well-suited to delivery or a strong digital infrastructure that allowed them to pivot more easily to an off-premise model.
Meanwhile, casual-dining brands built around their dine-in experiences, not surprisingly, saw some of the steepest comps fall-offs after government restrictions on restaurants and social gatherings began in the U.S. in mid- to late March.
Nation’s Restaurant News looked at results from publicly traded Top 200 companies or divisions that reported comps for quarters ended on or near March 31 — as well as others providing hints about what they will soon report — to shed some light on the toll coronavirus has taken so far, as well as the depth of the challenge the industry may face as it moves forward.
Delivery and drive-thru expertise offer an edge
Of the 20 restaurant chains or divisions whose recent results were reviewed, only six escaped the quarter with positive comps. They were: Wingstop’s U.S. division; Papa John’s North America and International divisions; Domino’s, U.S. and international divisions; and McDonald’s U.S. division.
The brands were all marked by a heavy emphasis on digital infrastructure and/or store locations equipped with drive-thrus.
Wingstop, which in recent years worked to build and refine its mobile ordering infrastructure and delivery presence, found itself well positioned to quickly pivot to a delivery and takeout model. As a result, its domestic system reported a 9.9% comps increase for the quarter ended March 28, which was actually an improvement over the 7.1% increase in the same quarter a year ago.
Pizza delivery specialists also fared relatively well. Papa John’s reported a same-store sales bump of 5.3% in the U.S., and 2.3% internationally for the quarter ended March 29. And Domino’s, which like Wingstop has long prioritized digital investment, reported a 1.6% increase in domestic same-store sales and a 1.5% increase in its international division. Those figures marked significantly slowed growth for Domino’s, but were nonetheless strong relatively to brands in other segments.
McDonald’s, U.S., barely squeaked onto the black side of the ledger with a reported first quarter increase of 0.1%, compared with 4.5% growth in the same year-earlier quarter. McDonald’s recently had been the strongest comps performer among the Big 3 burger chains, but its 8.1% domestic same-store-sales improvement across January and February was all but undone by the 13.4% same-store sales decline it saw in March executives said.
Full-service takes the biggest hit
Early reporting casual-dining chains saw some of the steepest comps fall-offs. Among them were three well-known polished brands: The Cheesecake Factory, Fleming’s Prime Steakhouse and Wine Bar and Bonefish Grill, with dips of 13%, 13.2% and 13.9%, respectively. If those drops seem relatively tame, given widespread dining room closures, they can be explained away as a matter of timing, as table-service bans came relatively late in the quarter.
A clearer picture of the true potential hit of coronavirus may be better seen in several full-service operators in non-scheduled reporting or additional notes in conventional earnings statements, such as those detailing comps erosion of 46%, 40% and 38.6% for the month of March (or a five-week spread ending near the end of March) by The Cheesecake Factory, Fleming’s and Bonefish Grill, respectively.
But some of the most startling early reporting didn’t come from within the casual- or fine-dining segments, but rather from the dine-in pizza ranks. Chuck E. Cheese’s and Peter Piper Pizza parent CEC Entertainment Inc. called out a 21.9% decline in same-store-sales at domestic company run locations that traditionally have been dependent on crowds of game-playing kids and their parents.
A sign of things to come?
The blended results of the first-to-report companies hint at just how quickly and decisively COVID-19 undid past progress. As a group, in the recent-ended quarter, the tracked brands on average, saw their same-store sales decrease by 5.4%. That compared with average comps growth of 2.7% in the immediately preceding quarter and an average hike of 2.4% in the same year-ago March ended quarter.
Furthermore, as was the case with the casual-dining brands, full-quarter results often obscured steep declines seen in the final weeks of the quarter, after dining room closures social distancing efforts began in earnest. Early results from several companies show just how sharply results fell once those restrictions became widespread.
Starbucks, for example, reported 3% fall in comps for the U.S. market for the second quarter ended March 29. But executives noted that same-store-sales plummeted by 65% the last week in March. For comparison, Starbucks’ U.S. division had enjoyed 6% comps growth in the preceding quarter and a 4% build up in the year-earlier first quarter.
Management at Noodles & Company shared similarly attention-grabbing figures. They noted that while the fast-casual pasta-and-more brand got out of the first quarter with a comparatively manageable 7.2% decrease in comps, compared with 3% growth a year earlier, the decrease during the last three weeks of March amounted to a 46.3% step backwards.
Earlier this month Red Robin executives relayed that while same-store sales had moved upward by 3.4% across the eight weeks ended Feb. 23, things turned negative in the week ended March 8 and then sank by more than 70% during the second half of March before improving slightly to negative 63.9% and 65.2% in the first two weeks of April. Red Robin has not yet reported full results for its most recent quarter, which ended April 19.
Wendy’s, while noting that it had a “very successful” early March launch of the chain’s new breakfast service, also telegraphed its pandemic plight ahead of its scheduled quarterly report. Prior to the March 29 end of the 13-week first quarter, Wendy’s management revealed that same-store sales were up 2.8% for the first 12 weeks but acknowledged that they had dipped by about 20% during the final week of that string.
Contact Alan J. Liddle at [email protected]
Follow him on Twitter: @AJ_NRN