Restaurant Quarterly Update – Fall 2020 M&A Advisory

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Restaurant Quarterly Update – Fall 2020

The U.S. restaurant industry was hit particularly hard by the global COVID-19 pandemic, with the National Restaurant Association estimating $185 billion in lost sales from March to August across the restaurant and foodservice industry and 6.1 million (M) individuals that lost employment.

Since the height of the pandemic in April, restaurant sales have continued to improve each month, with September same-store sales (SSS) at a decline of 8.1%, marking the best results since the onset of COVID-19. The modest rebound has been attributed to relaxed capacity restrictions, favorable outdoor dining weather and pent up consumer demand to return to a state of normalcy.

Restaurant Quarterly Update – Fall 2020

The COVID-19 pandemic has not treated all restaurant concepts the same. Concepts that entered the pandemic with strong off premise sales capabilities, high consumer loyalty and high convenience factors have generally out-performed other concepts. More than 15 chains, 9 of which are full service, casual dining concepts, have declared bankruptcy in 2020, in large part due to the challenges experienced as a result of state-mandated dine-in closures and significantly negatively impacted traffic.

Despite the improved performance over the past few months, there is still significant ground to cover before the industry fully recovers to pre-COVID-19 levels. There are significant risks–upcoming cold weather will likely limit consumers’ attraction to outdoor dining, the potential threat of a second wave of the virus and ongoing cash flow challenges across the industry–pointing to a prolonged recovery well into 2021. Changing consumer behavior has further impeded the recovery efforts, with 48% of consumers surveyed by Restaurant 365 indicating they will exercise more caution in dining out and may not return to pre-pandemic dine-in frequency.

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