Consumers, stimulus checks in hand, are spending at restaurants, often outpacing 2019 numbers and creating supply chain problems in the process.
Last year was better than Carl Howard expected. Fazoli’s, the Ohio-based Italian chain where he is the CEO, saw sales plunge last March and April at the outset of the pandemic. But the company advertised, customers lined up in its drive-thrus, and by summer sales were up in the double digits. They were up 20% in January.
But that was nothing compared to March. “We’ve been on fire. We’re shattering every record,” he said on Monday. “Yesterday was the busiest Sunday in the history of the company. Last week was the busiest sales week. The week before that was the busiest sales week, and the week before that.”
“It’s goofy. We didn’t expect to be up 181% yesterday.”
Consumers, weary of the pandemic and armed with a lot of cash, have been on a spending spree. And with fewer restaurants open after a year of closures and restrictions, those open are generating strong sales, often exceeding pre-pandemic levels by a sizable amount. Consumers are lining up in drive-thrus, ordering delivery and takeout, and filling up whatever seats are available at their nearest steakhouse.
The sales surge is causing a number of headaches. Some operators report supply shortages and distribution challenges as restaurants struggle to keep up with demand. Labor challenges pose a bigger concern, both for restaurants suddenly staffing up to meet demand and for distributors and other companies working with them.
And then there’s the simple challenge of planning for it all. “What’s going on now makes it difficult for my forecaster,” Howard said.
Sales have taken off at both traditional dine-in restaurants and limited-service chains. Sales at restaurants rose 21% in the week ended March 21 and 24% at fast-food restaurants, according to the data firm Facteus. Total spending rose 21 percent last week. Many operators say they’ve generated higher levels of both takeout and dine-in sales.
Darden Restaurants said last week that same-store sales have turned positive over 2019 levels at both LongHorn Steakhouse and Olive Garden. This week, BBQ Holdings said sales are surging at both Famous Dave’s and Granite City Food & Brewery. At an In-N-Out in Las Vegas, consumers lined up at night to get one of the chain’s burgers.
A lot of these sales have to do with stimulus payments, which helped the industry generate sales last April and again in January. It’s doing it again in March after the federal government sent out $1,400 checks.
“Stimulus checks have hit American pocketbooks,” Greg Flynn, founder of massive franchisee Flynn Restaurant Group, said on this week’s episode of the Restaurant Business podcast “A Deeper Dive.”
“They are basically taking their stimulus checks and walking into our restaurants and handing them over. It’s incredible.”
To be sure, sales were at least expected to appear strong this month simply because of easier comparisons, but the addition of the stimulus has taken sales at existing chains far above that level. The combination of stimulus and excess unemployment benefits means consumers have more money to spend—consumer incomes have been elevated so far this year. The excess unemployment benefits are scheduled to last through September.
Indeed, executives interviewed for this piece mentioned those benefits as a reason for their struggles in getting workers.
With consumers not spending as much, they’re saving more. The savings rate likewise remains elevated, meaning people are in better financial shape. So they’re going out to eat.
The surge in restaurant sales—especially in-restaurant dining—has elicited concern that a fourth surge in the coronavirus could put a halt to the party in the coming weeks even as more people are vaccinated. Rochelle Walensky, head of the U.S. Centers for Disease Control, pleaded with states to pause reopenings, citing rising rates of the virus throughout the country.
Still, the strong sales have given confidence to executives—especially in a casual dining sector that was hammered over the past year.
“The past 10-15 years, casual dining has definitely lost market share to fast casual as they provided good food and convenience,” said Eric Slaymaker, CEO of the 23-unit casual-dining chain Winger’s. “My prediction is casual dining is going to make a resurgence. A lot of that comes down to the fact people have realized how much they’ve missed the experience of being able to go into a restaurant.”
He isn’t the only one with that view. “We anticipate a strong year for SPB and casual dining, reminiscent of the 1990s when you think of the heyday of casual dining restaurants,” said Jim Mazany, CEO of SPB Hospitality, operator of Logan’s Roadhouse and Old Chicago Pizza.
SPB’s concepts were in bankruptcy headed into the pandemic and many temporarily shut down a year ago as dine-in service was halted. The chains were sold to investor Fortress Investment Group out of bankruptcy and today SPB and franchisees operate 247 locations in various brew pub and casual dining brands.
This year could not be any more different. “We had a building trend that really started in the fourth quarter of last year,” Mazany said. “The Logan’s brand has been doing great. As we started to round this year and into February, with the stimulus and with vaccines getting out to America, those things have been giving us rocket fuel. We’re now in the mode of comparing versus 2019.
“March has been an incredible month so far. Been a solid, solid performer versus 2019. We are seeing double digit increases across our system.”
Winger’s, based in Salt Lake City, has thrived over the past couple of weeks. “The week of March 15, we had just under half our stores had record sales weeks,” Slaymaker said. “Last week, the week of the 22nd, was almost as strong sales. We only had two stores register a record sales week. I guess we consider that a down week now.”
Slaymaker said that getting supplies has been a struggle—especially because Winger’s specializes in chicken wings, which have been in high demand during the pandemic, along with chicken fingers. “There were times where we’ve been caught a little bit behind the demand,” he said. “We did have one store that was out of wings for a short period of time.
“For the most part, we’ve been OK. We’ve been able to cover it.”
At Fazoli’s, same-store sales are up more than 80% in March and nearly 35% over 2019. The company was expecting a strong March. Not this strong.
“We budgeted up 60% in March,” Howard said. “We were on this high trajectory, plus the stimulus, plus comping over last year. And we’re going to beat that by 20%.”
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