The once-high-touch full-service segment becomes no-touch
Under the new operational guidance to protect both workers and guests, six feet of personal space is the minimum and the ventilation patterns of indoor spaces are especially suspect.
Restaurant settings that were once cozy and comfortable have become scary and inhospitable. For years, waiters were told that a touch on the guest’s shoulder would help them increase their tips. But no more.
High touch has become no touch.
During the pandemic’s most severe dine-in restrictions, brands were forced to rely predominantly — if not solely — on the relative anonymity of delivery, takeout and curbside pickup. Full-service restaurants, already seeing a decline in sales, struggled the most.
“These are indeed challenging times for the world, our country, our industry,” said Wyman Roberts, CEO of Dallas-based Brinker International Inc. and its Chili’s Grill & Bar and Maggiano’s Little Italy brands, both of which turned to off-premise sales during the coronavirus restrictions.
In the last week of June, for example, longtime full-service Brinker announced it was bringing a new virtual, delivery-only brand to market with the widespread introduction of the new It’s Just Wings chicken wings concept with DoorDash in as many as 1,000 of its brick-and-mortar kitchens.
Darden Restaurants also embraced off-premise for the long term, though officials there remain optimistic that the full-service category will be restored.
“Over the past three months, our businesses — our business changed in ways we never imagined,” said Gene Lee, CEO of Darden Restaurants Inc., in late June.
“When I look back on all that has transpired, one thing that stands out is the resiliency of the full-service dining industry,” Lee said. “Prior to the pandemic, total annual sales for the casual dining industry was approximately $108 billion. And while I do not know how long it will take the industry to recover from the significant impact it experienced, I am confident that this category will get back to the size it once was.”
Lee, who oversees such brands as Olive Garden, LongHorn Steakhouse and Cheddar’s Scratch Kitchen as well as others, said full-service restaurants play a vital role in communities as evidenced by how consumers “relied on restaurants over the last several months” in a totally to-go environment.
“While off-premise will continue to play an important role as we recover, we know that the consumer still wants to enjoy an in-restaurant experience,” Lee said. “In fact, going out to a restaurant with friends and family is the No. 1 activity consumers say they look forward to doing as the economy opens back up, and we've seen that as our dining rooms reopen across the country.”
No more games
Some parts of the full-service industry were less fortunate in the now low-touch world.
The eatertainment segment, which was booming as a way to lure customers out of their homes and away from Netflix in a highly social environment, suffered deeply as distancing became the watchword .
Denver-based Punch Bowl Social temporarily closed all 20 of its locations and eventually permanently shuttered two of those — one in Stapleton, Colo. and one in Schaumburg, Ill.
And amid those closures, Cracker Barrel Old Country Store Inc. announced it was pulling out of its $140 million non-controlling stake in Punch Bowl after less than a year to focus “on its core business.”
Punch Bowl Social was meeting with investors and looking at other financing options, CEO Robert Thompson said.
Thompson said the Stapleton and Schaumburg locations closed as a result of being unable to negotiate with their landlord, but that most of their landlords throughout this process have been “understanding that we all lose if we don’t jointly absorb this pain.”
Dallas-based Dave & Buster’s Entertainment Inc. had to shut down all 137 of its eatertainment units on March 20 and only began to reopen them in May.
“Our singular goal has been to weather the shutdown period and reopen our stores as soon as we safely can,” said Brian Jenkins, Dave & Buster’s CEO in mid-June.
The COVID-19 impact was deep. For the first quarter ended May 3, Dave & Buster’s revenues decreased 56% compared with prior year period including a 59% decrease in same-store sales.
“During the three weeks leading up to March 20 closures, we had already experienced significant declines in traffic as consumers proactively started avoiding restaurants and group entertainment venues. Our first quarter results clearly reflect that sudden change in our business,” said Scott Bowman, Dave & Buster’s chief financial officer.
Wall Street analysts from Jefferies said in a note that the post-shutdown consumer has changed from before the coronavirus restrictions.
Early feedback “seems to show more young adult consumers and less parents with kids (understandable to some extent even with new cleaning and safety measures this is still a high-touch environment) and about a 5%-point mix to games/amusements from food,” the report said.
Jefferies noted that Dave & Buster’s is working on changes in the service model that include testing a contactless order-and-payment system at tables and the size of the menu was trimmed from 40 items before the pandemic to around 15 now.
“High degrees of uncertainty and volatility are likely,” Jefferies noted. “We remain of the view that near-term improvements will be choppy and slow.”
The volatility extended into planned mergers in full-service landscape, with at least one deal going under.
Dallas-based TGI Fridays, a longtime casual-dining fixture, was set to merge with Allegro Merger Corp. , but that $380 million deal collapsed in early April because of “extraordinary market conditions” caused by the pandemic.
Don’t serve yourself
Perhaps most impacted by coronavirus was the buffet segment, which required consumers to touch things as part of their appeal. Reopening guidelines for a number of states, however, said buffets had to remain closed.
In May, Garden Fresh Restaurants LLC, parent to the Souplantation and Sweet Tomatoes buffet brands, filed for Chapter 7 bankruptcy and began liquidating its assets , closing all 97 of its restaurants and three distribution centers.
In June, Luby's Inc., Houston-based parent to the Luby’s Cafeteria and Fuddruckers brands, announced it was seeking to sell its real estate assets , wind down its operating divisions and distribute net proceeds to shareholders if the company couldn’t be sold in its entirety.
Raleigh, N.C.-based Golden Corral Corp., known for its scatter-buffet format, was forced to suspend operations at its 35 company-owned units in March . Some franchisees began reopening as state and local restrictions eased in May.
Golden SW Financial, for example, a franchisee in Tucson, Ariz., reopened May 11, but the buffet had been transformed to “cafeteria-style service that eliminates the need for guests to touch serving utensils,” along with social-distancing measures.
As if to put a nail into the coffin, the most recent Food and Drug Administration guidelines, issued in response to the novel coronavirus, recommend “discontinuing operations, such as salad bars, buffets and beverage service stations that require customers to use common utensils or dispensers.”
Dallas-based Pizza Inn, which instituted a contactless buffet-to-go during the shutdown, in May announced the launch of its “New Right-Way Buffets” for restaurants that were reopening.
Procedures vary by location, but changes include cafeteria-style service and even table service at some units; one-way traffic around the buffet to minimize contact; guests will be given gloves or sanitizer before helping themselves; and utensils will be changed between each customer.
“Our New Right-Way Buffet is our way of giving guests the buffet experience that they have come to love while practicing enhanced health and safety measures,” said Justin Smith, Pizza Inn’s senior director of operations, in a statement.
