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The State of the US Restaurant Industry during the COVID-19 Pandemic

By: Douglas Daly – April 24, 2020

It is no secret that the restaurant industry is experiencing a dramatic downturn as shelter-in-place policies have taken hold across the US since the beginning of March. The charts below show the change in spending on a Year-over-Year basis for both overall Restaurant spend, as well as the number of transactions at restaurants.

 

Figure 1: YoY Weekly Restaurant Spend (Facteus)

However, the restaurant industry is not a monolith group where all restaurants perform the same, people are not uniform, and stay-at-home policies vary by geography. By leveraging our 17+ billion transaction dataset of nationwide card spend data with over 180 restaurants tagged, Facteus is able to provide a much richer and nuanced view of the restaurant industry, and the impact COVID-19 has had across the different sectors within this industry.

Industry Performance by Restaurant Chain

To better understand the drivers of performance in the restaurant industry, we looked to group the restaurants we had tagged in the database by sales performance. To do this, we applied the Gaussian Mixture Model (GMM) to cluster restaurants based on weekly sales relative to the week ending March 1, 2020. GMM uses the Mahalanobis distance metric, which ensures different sales results are weighted by the variability of that given week. The resulting clusters, shown below are distinct and striking in their divergence:

Figure 2: Weekly restaurant spend by cluster relative to March 1, 2020 (Facteus)

From the generated clusters, we observed the following narrative: as customers shifted en masse to working and dining at home, their dining needs shifted accordingly.

OUT: Dine In; Experience; Near shopping or the workplace

IN: Close to home; Takeout/Delivery; Value for the money

Specifically, we outlined the worst and best performing restaurant companies.

Worst performers:

  • Aramark (targets office workers)
  • Chuck E. Cheese, Cheesecake Factory (dining in, experience)
  • Disney US Parks, Six Flags (parks are closed, associated w/ crowds)
  • Cinnabon, Sbarro (food court, associated w/ crowds)

Medium Performers:

  • US Connect, USA Canteen (vending)
  • Starbucks, multiple fast food chains (associated w/ dine-in and takeout)

Best performers:

  • Pizza Hut, Sonic Drive-In, Dutch Bros Coffee (mature delivery, drive-thru or takeout infrastructure)
  • Grubhub, Doordash (food delivery)

In many ways, the clustering we are seeing is what would be expected given the social distancing measures that have been put in place. Going forward, the more interesting question we will be looking to answer is whether these performance clusters represent a ‘new normal” or if the industry returns to its “old normal,” and if it’s the latter, at what point do we start to see the reversion towards normal?  Right now, the data suggests the spread between the top and bottom performers is continuing to grow.

Restaurant Industry by Region

Similarly, we wanted to look at restaurant performance from a regional perspective to see if regional norms and/or differing stay-at-home rules impacted restaurant sales and traffic. To do this, we segmented restaurant data by state into 4 categories:

  • Cluster 0: Immediate and sustained loss of restaurant business revenue
  • Cluster 1: Similar loss as Cluster 0 after delay of 1 week
  • Cluster 2: Pattern matching Cluster 1 with less loss of business in later weeks
  • Cluster 3: Less loss of business than Cluster 2

 

Figure 3 Weekly transaction count & spend by State cluster (Facteus)

We displayed these results on the map below. As expected, business loss roughly aligns to states where restrictions are the greatest.

 

Figure 4 Restaurant industry clusters by state (Facteus)

We also take a more granular view of the data, as a one-month industry snapshot does not tell the full story, particularly given how quickly things are changing on the ground. To that end, we ran weekly snapshots of the restaurant industry by state as shown by the graphic below:

Figure 5: Weekly restaurant spend by state (Facteus)

Lastly, we examine whether a state’s restaurant industry performance is more reflective of its cities or its rural areas.  We applied the GMM state clustering model to data for the 100 largest metropolitan areas for comparison.

Figure 6 Restaurant industry clusters by metro area

 

Our data indicates that nearly 80% of the major cities map to clusters associated with the greatest loss of business.  The cities which mapped to the middle (yellow) cluster are generally located in the South and Midwest regions.  Two notable exceptions are Buffalo, NY and San Bernardino, CA, which also mapped to the better performing cluster.

Here as well, the data seems to confirm what you might expect, namely the fact that large metro areas are shouldering the brunt of the impact, given their population and restaurant density.  The key question going forward is whether the nature of the restaurant industry changes permanently in the metro areas, or whether they can return to the old normal. If they can return to normal, it will be interesting to see which metro areas recover first and recover the fastest.

We will continue to follow the restaurant industry (as well as others, e.g. grocery stores) using this clustering methodology, and plan to provide updates on how COVID-19 is impacting the health of these businesses. Please visit FIRST.facteus.com often or follow us on LinkedIn or Twitter (@facteus) to be notified when we publish updates.

Appendix – List of Restaurants included in analysis

3 Square Market, A&W Restaurants, Applebee’s, Aramark, Arby’s, Au Bon Pain, Auntie Anne’s, Avanti Markets, Avi Food Systems, Inc., Bar Louie, Barnes & Noble, Baskin Robbins, Bigby Coffee, BJ’s Restaurant & Brewhouse, Blaze Pizza, Bob Evans, Bob’s Big Boy, Bojangles, Bonefish Grill, Boston Market, Braum’s Ice Cream, Bruegger’s Bagels, Buffalo Wild Wings, Burger King, Café Rio, Captain D’s, Caribou Coffee, Carl’s Jr., Carrabba’s, Charley’s Philly Steaks, Checker’s Drive-in, Cheddars, Chick-Fil-A, Chicken Express, Chili’s, China Buffet, China Wok, Chipotle, Chuck E. Cheese, Church’s Chicken, Chuy’s, Cici’s Pizza, Cinnabon, Coca-Cola, Coffee Bean & Tea Leaf, Cold Stone Creamery, Cook Out, Cooper’s Hawk, Corner Bakery & Café, Cracker Barrel, Crane Merchandising Systems, Culver’s, Dairy Queen, Dave & Buster’s, Del Taco, Denny’s, Dickey’s Barbecue Pit, Disney US Parks, Domino’s, Donato’s Pizza, Doordash, Dunkin’ Donuts, Dutch Bros. Coffee, Eat Street, Eat’n Park, Einstein Noah Restaurant, El Pollo Loco, Eurest Dining Services, Famous Dave’s Fazoli’s, Firehouse Subs, First Watch, Five Guys Burger & Fries, Five Star Food Service, Fox’s Pizza Den, Freddy’s Frozen Custard, Friendly’s Ice Cream, Fuddrucker’s, Golden Chick, Golden Corral, Great American Cookies, Grubhub, Hardee’s, Hooters, Huddle House, Hungry Howie’s Pizza, Hy-Vee, IHop, In-N-Out Burger, Jack in the Box, Jack’s Family Restaurants, Jamba Juice, Jason’s Deli, Jersey Mike’s Subs, Jet’s Pizza, Jimmy John’s, Johnny’s Pizza House, Jollibee, KFC, Krispy Kreme, Krystal Company, Little Caesar’s, Logan’s Roadhouse, Longhorn Steakhouse, Marco’s Pizza, McAlister’s Deli, McDonald’s, Mellow Mushroom, Mod Pizza, Moe’s Southwest Grill, Nayax, Newk’s Eatery, Ninety-Nine Restaurants, Noodles & Company, Nordstrom, O’Charley’s, Old Chicago Pizza & Taproom, Olive Garden, On the Border Outback Steakhouse, P.F. Chang’s, Panda Express, Panera Bread, Papa Gino’s, Papa John’s, Papa Murphy’s Pizza, Peets Coffee & Tea, Pilot, Pizza Hut, Pizza Inn, Pizza Ranch, Pollo Tropical, Ponderosa/Bonanza, Popeye’s Louisiana Kitchen, Portillo’s, Potbelly’s Sandwich Shop, Pret A Manger, Qdoba, Quizno’s, Raising Cane’s, Red Lobster, Red Robin Gourmet Burgers & Brews, Rita’s Ice, Rooster’s, Round Table Pizza, Ruby Tuesday, Saltgrass Steak House, Sarku Japan, Sbarro, Schlotzsky’s, Shake Shack, Shoney’s, Six Flags, Sizzler, Smashburger, Smoothie King, Sonic Drive-in, Sonny’s BBQ, Starbucks, Steak N Shake, Subway, Sweetfrog, Taco Bell, Taco Bueno, Taco John’s, Taco Time, Texas Roadhouse, TGI Friday’s, The Cheesecake Factory, The China King, Tim Horton’s, Tropical Smoothie Café, Twin Peaks, Uber Eats, USA Canteen Vending, USA Technologies, US Connect, Village Inn, Waffle House, Waitr, Wendy’s, Western Sizzlin, What-a-Burger, Which Which, White Castle, Wienerschnitzel, Wingstop, Yard House, Zaxby’s