- Casual restaurant chain sales are booming well above 2019 levels.
- More than 10% of all US restaurants closed since the beginning of the pandemic, many independent.
- An analyst says the restaurant closures benefitted large chains.
A major slice of the restaurant industry closed permanently in 2020 as a result of the COVID-19 pandemic and dining room closures, and it’s led to an unexpected boost for casual dining chains like Texas Roadhouse, Olive Garden, and The Cheesecake Factory.
Official counts vary, but experts agree that at least 10% of all US restaurants closed since the pandemic hit in spring 2020, with some counts as high as 17%. Even on the lower end, 10% of restaurants mean that at least 79,000 had closed permanently as of March 2021, according to Dataessential. The National Restaurant Association says more than 110,000 establishments have closed, after being in business for 16 years on average.
Large chains generally have access to more resources and money, and have weathered the pandemic better than independent restaurants, which make up 70% of the industry. Quick-service fast-food chains, like McDonald’s and Starbucks, did better than other sectors of the restaurant industry, in part due to their ability to keep business going during dining room closures with drive-thrus and mobile orders.
Independently owned “mom and pop” restaurants, 64% of which were full-service establishments before the pandemic, were at particular risk of closure within the industry. Now that many of them are gone, casual chain restaurants are thriving in the less competitive environment, Kalinowski Equity Research founder Mark Kalinowski told Insider. Most of the closures of the past 18 months were “skewed toward independent mom and pops, mostly in casual dining and full service,” he said.
Now, there is “meaningfully less competition for larger chain casual diners,” Kalinowski said.
Sales are booming for the casual dining chains that have managed to stay open. At Texas Roadhouse, same-store sales are up over 80% over 2020, which was of course low because of COVID-19, but they’re also up 21.3% over 2019 levels. Visits are up too, according to Placer.ai, indicating more customers are visiting the chain and are spending more money. Same-store sales are up over 37% at Olive Garden, parent company Darden reported in its most recent earnings call, and monthly visits have been hovering around 2019 levels and even surpassing them. Other casual chains including The Cheesecake Factory and Longhorn Steakhouse are seeing similar bumps in sales.
The return to casual dining is impressive given headlines over the last decade proclaiming the death of casual dining and millennials killing chains like Applebees. For a time, the growth of fast-casual chains like Panera and Chipotle seemed like they might strike the final blow on casual chains, but like many industries, COVID-19 and its impacts have changed trajectories.