Additional restaurant jobs and the financial stimulus bundle counsel that the trade is about to get better
Restaurants and bars hired 286,000 workers in February after several months of job losses. This is the latest sign that the industry is recovering after a long, cold winter.
Freezing temperatures, combined with a resurgence of new Covid-19 cases, hurt restaurants in late 2020 and into the new year.
“As of now in 2021, I’d say it looks worse than October and November,” said Amit Sharma, senior analyst at Rabobank.
But after severe winter storms, some parts of the country are starting to get warmer. The vaccine distribution, which started slowly, has picked up rapidly over the past month. More than 54 million Americans – about 16% of the total population – received at least one dose Thursday morning, according to the Centers for Disease Control and Prevention. The approval of the Johnson & Johnson vaccine, which is marketed through Merck, will further accelerate these numbers.
“If you look at our forecast for the future, a big part of our view of the rest of 2021 and even through 2022 is the speed at which this vaccine will be introduced,” said David Henkes, Technomic senior principal.
In response to the accelerated distribution of vaccines, states have begun to relax or even prepare for capacity constraints in restaurants and other venues, although officials at the Centers for Disease Control and Prevention have recommended slowing down the removal of restrictions. Since the beginning of March, at least 35 states have eased restrictions in some way. For example, Connecticut plans to allow restaurants to operate at full capacity by the end of March.
However, a recent industry survey revealed palpable signs of pain. The National Restaurant Association surveyed 3,000 restaurant owners between February 2 and 10. Respondents were pessimistic about the industry’s recovery efforts. About a third said it would take seven to 12 months for business conditions in their restaurant to return to normal, and 29% said it would take at least a year.
Just a few weeks later, sentiment is feeling a little brighter, partly due to progress made in approving the latest stimulus package. If the bill were passed, $ 1,400 would be deposited into the bank accounts of many consumers who may be spending at least some of that money on food while still feeling uncomfortable while traveling. Democrats are working to get the plan approved by March 14th.
“What we saw when these were on display is that restaurants were a beneficiary,” said Henkes. “There’s a pent-up demand from consumers.”
Additionally, the stimulus plan includes a program that grants restaurants up to $ 10 million in grants if they lost money last year. These funds could help independent restaurants pay bills, hire staff and stay afloat in time for the warmer spring temperatures. Fourteen percent of NRA respondents said they would likely or definitely close their doors within the next three months if they did not receive government support.
Even with another stimulus package, Sharma doesn’t expect the restaurant industry to snap back immediately once everyone has access to the Covid-19 vaccine, based on Australia’s recovery.
“After their cases hit single digits in July and August, it took them another six months for their total food service sales to approach pre-pandemic levels,” he said. “Cases – as vaccines go up – will fall and there is some catching up to do and excitement, but it will take time for consumers to get back to their pre-pandemic habits.”
Technomic’s latest forecast predicts that the average annual growth rate of restaurants and bars will only decrease by 3.6% between 2019 and 2021.
Based on discussions with restaurant operators, Sharma expects the second quarter of this year to see the highest year-over-year growth. Not only was it the hardest hit quarter of last year due to lockdowns, but stimulus checks and vaccine distribution should drive sales.
Henkes said he sees July 4th as a tipping point where the restaurant industry’s recovery will really accelerate.
At the moment the trends are still looking crooked. Fast food restaurants recovered faster than full-service restaurants thanks to lower prices and take-away expertise. Full-service restaurants were also impacted by indoor restrictions and fewer outdoor customers in the winter. Additionally, chains have outperformed independent restaurants and gained market share as mom and pop businesses close their doors permanently.
By the time most U.S. consumers are ready to resume their pre-pandemic routines, the U.S. restaurant industry landscape could look very different.
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