Bringing back restaurant business post-COVID-19 New
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21 May 2020

Update procedures, reactivate customers, realign menus, optimize delivery
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A new report by McKinsey & Company analyzes the effects of COVID-19 on the US restaurant industry, and makes recommendations for adjusting to the New Normal post-pandemic.

Impact of COVID-19 on restaurants to date (19 May 2020):

Impact on individual restaurants has depended on several factors. Certain types of restaurants have been disproportionately affected, including restaurants:

  • With a predominately on-premise sales mix
  • Having a lot of breakfast or morning coffee business
  • In densely populated areas like CT, NY (where traffic is now down 60%)
  • Without a strong online ordering presence
  • Not perceived as offering high value or low prices

Most likely scenarios for recovery of the restaurant industry

McKinsey analysts developed 9 possible scenarios, and pick the following 2 as most likely at this time:

Scenario A3:

  • If the virus is contained, restaurant sales will be down 15%-25% vs. 2019 in 1Q2021.
  • If the virus recurs, sales will be down 25%-35% vs. 2019 in 1Q2021.

Scenario A1:

  • Sales at fast-food pizza restaurants will return to pre-crisis (2019) levels in 4Q2020.
  • Sales at fine-dining restaurants will not recover until 2Q2024.
  • Other categories will have intermediate recovery rates (quickest to slowest): quick service, fast casual, coffee, casual).

McKinsey acknowledges that these are dire predictions, and estimates that approximately 1 in 5 (or 130,000) restaurant locations that were in business in 2019 will close by 2021 - but this could change depending on how well restaurants implement safety measures to prevent recurrence of the virus.

McKinsey's recommendations to restaurateurs for returning to stability during recovery from the pandemic:

  • Update procedures and staffing for safety and to reassure customers
  • Do segmented reactivation of customers, in this order:
    • Loyal guests
    • Guests who have shifted business to competitors during the pandemic
    • People who became first-time customers during the pandemic
    • Potential new customers
  • Adjust menu and pricing to changed consumer preferences
  • Optimize delivery since consumer preference for off-premise dining will probably endure forever

Then for shaping the new normal:

  • Change layout to accommodate changed consumer preferences and behavior: drive-through and pickup options, demand forecasting, labor automation
  • Assess and address risk levels at steps in customer journey through restaurant
  • Reinvent the menu according to emerging trends: paleo, plant protein, etc.
  • Optimize locations and markets
  • Optimize digital customer engagement

Comments:

As the McKinsey analysts have said, those surely are dire predictions. But these people know what they're doing, have been doing it a long time, and have to be considered a reliable source. Anybody in the restaurant business needs to:

  • consider the immediate future in light of these projections
  • act accordingly to whatever extent finances permit
  • use the resources of your national and regional industry associations
  • support their lobbying of legislators
  • take any help the government may offer

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External Article: https://www.mckinsey.com/industries/retail/our-insights/how-restaurants-can-thrive-in-the-next-normal


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