November 11, 2020
Restaurants May Not Recover Until 2025

Restaurant sales should bounce back strongly next year as consumers return to the industry as the coronavirus pandemic (hopefully) eases. But it won’t come all the way back. And some sectors will take a lot longer than others.

That, at least, is according to Restaurant Business sister company Technomic, which expects it to take until 2023 for the restaurant industry to fully recover—according to data presented at the FSTEC Community.

But that recovery will be led by limited-service restaurants, and especially fast-food concepts, that have thrived on takeout, drive-thru service and delivery during the pandemic.

Full-service is a much different story: The full-service sector isn’t expected to recover until 2025.

And the industry that will emerge won’t be the same. “We’re going to see a different industry,” Technomic Managing Principal Joe Pawlak said. “But certainly one that will continue to thrive long-term.”

Technology, the subject of the FSTEC virtual event over the next few weeks, has been driving much of the industry’s sales improvement during the pandemic, both at limited-service and at full-service concepts.

Consumers remain hesitant to go back out to restaurants, said Wade Hansen, Technomic principal. “Consumers are still concerned” about the virus, which is keeping them away from traditional dine-in.

For those full-service restaurants, “off-premise is an unfamiliar model for a large percentage of operators,” Hansen said. Many turned to technology to help them take advantage of consumers’ desire for takeout service.

Much of the business lost during the pandemic has been from frequent customers. The percentage of people who dined out more than once a week declined from 51% before the pandemic to 34% since then. Meanwhile, the share of those who dined out less than once a week increased from 26% to 34%.

In other words, a lot more consumers are eating out less often than they did before the pandemic. “With fewer people going to work, hunkered down at home, they’re not thinking about doing those things that encourage them to go to restaurants,” Pawlak said.

The industry is seeing improving sales, even as another wave of the coronavirus builds, and sales are expected to pick up strongly next year.

Yet, indexed to 2019 sales levels, the industry is still expected to be 13% below where it was before the coronavirus hit, according to Technomic’s “best-case scenario.”

Limited-service restaurants can be expected to fully recover, however, with at worst a 3% drop from 2019 levels.

In the coming years, with limited service dominating the industry landscape, the restaurant business itself will change, toward more off-premise focused and digitally-enhanced efforts. “There’s going to be a reengineering of the whole marketplace,” Pawlak said.

Still, he said, though the industry has been damaged by the coronavirus and consumers have shifted, there is still considerable pent-up demand for restaurants. They will recover and then ultimately grow strongly in the coming years.

“Restaurants will be back,” Pawlak said.

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