Sales return to normal levels at massive chains, but independent restaurants continue to struggle — a trend that could permanently change the industry

ReutersDunkin’ is looking to buy up struggling independent coffee shops.
  • Spending at big restaurant chains is up 2%, while sales at small chains and independent restaurants are still down 15%, according to a Bank of America report.
  • A big chunk of the gap can be explained by the fact that chains are more likely to own fast-food and fast-casual locations, many of which built thriving drive-thru and to-go businesses before the pandemic, the report said.
  • Chains including Dunkin’, Chipotle, and Domino’s are already planning to buy up real estate occupied by struggling restaurants.
  • Visit Business Insider’s homepage for more stories.

Sales are returning to pre-pandemic levels at chain restaurants across the US. Independent restaurants are not as lucky.

Spending at big restaurant chains is up 2% through the week of August 22, according to a new report from Bank of America. Meanwhile, sales at small chains and independent restaurants remain down 15%.

Much of the gap can be explained by the fact that fast-food and fast-casual restaurants are more likely to be owned by larger chains, while dine-in restaurants are more likely to be independently owned, the report said. During the pandemic, restaurants focused on dine-in customers have struggled far more than locations that already had thriving drive-thru and delivery businesses.

Other advantages enjoyed by chains include “scale, access to capital, and years of technology investments,” according to the report.

The disparity between chains and independent restaurants represents a significant improvement from past Bank of America reports this year. In mid-April, there was a percentage-point difference of more than 30 in year-over-year sales performance. Bank of America estimated sales at chains and independent restaurants by analysing customers’ aggregated credit- and debit-card data.

Chains are preparing to ‘swallow up’ independent restaurants

Chains taking over independent restaurants 4x3iStock/Getty Images; Samantha Lee/Business InsiderChains see real-estate opportunities as a silver lining of the pandemic.

Bank of America said it expected some full-service restaurants to shut down permanently during the pandemic, which could boost sales at well-positioned sit-down chains such as Olive Garden’s parent company, Darden, in the long term. As mum-and-pop restaurants shut down, customers will end up eating at chains that survive the pandemic more often, when they feel safe to dine out once again.

Chains including Dunkin’, Chipotle, and Domino’s have already started scoping out real estate occupied by doomed restaurants,Business Insider reported last month.

“The pandemic is going to result in many vacant restaurant spaces around the city, which will provide an opportunity for better-capitalised restaurant companies to swoop in and take over these spaces if they see a good business opportunity,” Andrew Rigie, the executive director of the NYC Hospitality Alliance, told Business Insider.

“Unfortunately, many small-business owners won’t have the capital to start opening new restaurants,” Rigie added.

Just 66% of independent restaurant owners were confident that they would still be open in October, according to a July survey of independent restaurant owners conducted by the James Beard Foundation and the Independent Restaurant Coalition. According to the restaurant consultancy Aaron Allen & Associates, only about one in three independent restaurants may survive until the end of 2020.

Elliot Nelson, who owns 20 restaurants in Oklahoma and Arkansas, told Business Insider that a major chain has already approached him about taking over one of his restaurants’ leases. Nelson said he expected many independent restaurant owners to leave the industry altogether because of the pandemic.

“It’s going to be hard to muster up the energy to want to keep going and do it again,” Nelson said. “How would you feel if the biggest thing you worked really hard on was replaced by Taco Bell? So much of your soul goes into building unique stuff, and if you see it become so homogenous, that’s especially heart-wrenching.”

Read Business Insider’s full story on chains using the restaurant apocalypse as a chance to “swallow up” independent restaurants here.

Irene Jiang contributed reporting to this article.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.