Restaurants Set to Recover, But Not Nearly Enough

Beautiful happy young couple making a toast, celebrating anniversary or birthday in a restaurant. Husband and wife having romantic dinner in a restaurant by the river

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COVID-19 vaccinations may be underway across the U.S., but it’s a slow return to normalcy for many, including the restaurant industry, and it may be a while before your favorite watering hole is thriving again.

Even with expected growth of 10.2% this year in restaurant and food service sales, the industry probably won’t fully recover from the pandemic, the National Restaurant Association (NRA) said in its State of the Restaurant Industry report released Tuesday. A return to better levels will require restaurateurs to continue catering to both off- and on-premise dining.

Last year, industry sales slumped 19.2% from 2019, and from mid-March until the end of 2020, sales totaled $240 billion less than pre-pandemic forecasts, the result of mandatory shutdowns and reduced dining room capacity to help stop the spread of the coronavirus. Sales for 2020 had been projected at $899 billion.

At the height of the pandemic in April, 8 million industry jobs were cut or furloughed. By the end of 2020, jobs at restaurants and bars were still 2.5 million below pre-pandemic levels and 110,000 of the more than 1 million eating and drinking places in the U.S. were closed temporarily or permanently, according to the NRA.

The pandemic’s impact on the restaurant industry has been "brutal," according to Steve Lombardo, chairman of the Gibsons Restaurant Group, known for its steakhouses. In a Morgan Stanley podcast earlier this month, he said it’s "like you've gotten hit by a ton of bricks and kicked in the groin all at once.”

Those that survived had to pivot quickly to include delivery, online ordering, and off-premise menus. For example, Gibsons turned to delivering steaks across the U.S. 

To adjust to the pandemic, about two-thirds of fine dining and half of casual and family dining operators told the NRA they streamlined their menus. More than 60% of all restaurants surveyed said they plan to keep offerings where they are in the coming months.

“It was taking every menu item at every restaurant and putting it in a container, and letting it sit there for 30 minutes, and then tasting it, and saying, 'Okay, is that acceptable or not?'" Lombardo said on the podcast. "The things that did not taste well after 30 minutes of sitting in a container, you said, 'You know what? That doesn't belong on the menu.'"

According to Hudson Riehle, senior vice president at the NRA, both on-premise and off-premise dining will be needed to revive the industry.

“We've also found that even as the vaccine becomes more available and more social occasions return to restaurants, consumers will continue to desire expanded off-premises options going forward,” Riehle said in a statement. Both off- and on-premise dining "will continue to be key for industry growth,” he said.

There's a bright spot though—people love to eat out, and that might just have an effect on the restaurant industry’s recovery. Eighty-eight percent of adults said they enjoy going to restaurants and 85% actually prefer spending their leisure time dining out with family or friends than cooking or cleaning at home, according to the NRA’s report.

“Why do people go to restaurants? We're social animals," Lombardo said. "We eat together, whether it's a birthday, or an anniversary, or just hanging out with a bunch of friends. And they can say, 'Hey, I went to your place.' They have memories that they've created that we helped them create. And there's something beautiful about that.”