How Restaurants Are Adapting To New Realities In COVID-19 Lockdown

“Adapt or die” is an old business school adage that is often followed by something along the lines of, “If your business acts like a dinosaur, it’ll become extinct like one, too.”

Charming, right? Well, I’m not sure the people behind those business school textbooks ever considered the impact that a crisis the scale of the COVID-19 pandemic would have on retailers and restaurants.

With the coronavirus quarantine shutting down in-house dining at restaurants, food service businesses are failing in packs. How do these industries adapt to the lockdown and continue to thrive, even with their doors closed?

Let’s take a look at the state of the restaurant and retail foodservice market. Some of these businesses are adapting to the new realities of the COVID-19 crisis.

The Restaurant And Foodservice Pre-COVID-19

Before we were all told to stay inside for the foreseeable future, the restaurant industry was doing well. 

In an ICSC Report tracking food services’ role in the consumer journey, we were spending, on average, $71 a week on food services, with urban areas attracting as much as $89 in weekly spend at restaurants.

According to the U.S. Census Bureau, year-over-year growth for restaurants was spiking in January and February, with 6.8% and 5.2% growth, respectively. You could even say the foodservice industry was thriving.

Then, the wheels fell off the wagon, and growth fell to -23.0% in March. Ouch.

The Impact Of The Coronavirus On Restaurants

The sudden, negative shift that the COVID-19 crisis created produced some devastating results for the restaurant industry. 

Beyond the massive dip in year-over-year growth and monthly sales, the U.S. Bureau of Labor Statistics reported that the restaurant industry lost 417,400 employees in March alone. This massive spike in unemployment has put enormous strain on the New York City residential real estate industry as tenants struggle to keep up with rent payments to landlords.

With dine-in restaurants across the country restricted to only delivery and take-out services, the demand for an entire restaurant staff is down significantly. It may be some time before we start to see employment rates climbing again.

The good news is that restaurant sales are starting to normalize and even slowly increase after a tremendous decline. Between March 8 and March 22, sales dropped 60% versus the previous weeks. Businesses offering a casual-fast dining experience saw the most dramatic dip.

Since March 22, sales are starting to make the long, slow climb back up the hill. That week, sales climbed 6% and then another 3% the following week and so on. Each week since, sales have continued to nudge forward. These slight increases provide significant evidence that both consumers and restaurants are adapting to the COVID-19 lockdown.

How The Foodservice Industry Is Adapting To COVID-19

Several factors are influencing the slow, but much-welcomed, increase in restaurant and foodservice sales.

Consumer Mindset

Perhaps the biggest shift is in the mindset of consumers. Despite 86.26% of consumers reporting that they have been financially affected by the COVID-19 crisis, 73.4% still plan to order food from restaurants.

The initial panic of the coronavirus is starting to subside, and people are growing more accustomed to life in lockdown. This means an increased willingness to order food outside the house.

Restaurants Are Capitalizing On Digital Ordering

With dining rooms closed for the meantime, restaurants are seeing twice as many orders coming from online, digital channels. Some businesses are even encouraging all of their sales to come from digital ordering.

Adapting To The Dining-less Restaurant Experience

The restaurant experience has moved outside of the dining room and into the homes of hungry patrons. Foodservice businesses are taking advantage of every channel to connect eaters to their food, including drive-thrus, curbside pickup, delivery, and, in some states, in-store pickup.

The majority of orders are being handled without a customer ever stepping foot inside the restaurant. These contactless deliveries make customers feel safer about ordering.

Paying Meals Forward Through Gift Cards

Retailers and restaurant owners have been encouraging their customers to buy gift cards as a means of paying meals forward. These gift cards can be redeemed once these businesses open their doors again. It’s a great way to keep businesses afloat during the pandemic, but it may cause struggles after quarantine is over.

Feeding The Frontlines

One of my favorite New York City restaurants has found a way to not only adapt to the Coronavirus pandemic but also to help the frontlines!

Kissaki has launched a Meals for the Frontlines program, where people can pay to have sushi boxes brought to local hospitals to feed the healthcare workers that are tirelessly combating this virus and saving the lives of New Yorkers.

They’ve raised over $35,000, which helps support their business through the lockdown, while simultaneously helping the healthcare industry.

The CARES Act

On March 27, President Trump signed the Coronavirus Aid Relief and Economic Security Act, which is the largest economic relief package in U.S. history.

The CARES act provides direct relief payments to individuals and families earning less than $99,000 a year, which will help alleviate some of the New York City residential real estate woes I mentioned earlier.

It also provides direct relief to the businesses affected most by the crisis, including restaurants. Restaurant owners can apply for several benefits, including:

• Payroll Protection Program
• Qualified Improvement Property
• Employee Retention Tax Credit
• Loan Forgiveness Package
• And more.

You can find more details regarding these programs here.

Conclusion: The New York City Commercial Real Estate Industry Can Help

Restaurants occupying commercial real estate spaces and their landlords need to work together. When these parties can openly communicate and find a way to align their individual goals, it is rewarding for both sides.

As restaurants and other retailers find ways to adapt, the pressures on the New York City commercial real estate owners will start to lessen. Property owners need to remain patient and engage with their tenants and find ways to help them get back to the point they were at before the crisis.

We need to navigate COVID-19 collectively!