Posted on April 13, 2020
By Dr. Robin DiPietro, Director, International Institute for Foodservice Research and Education
The immediate impact of the COVID-19 crisis on the food and beverage industry is devastating. The National Restaurant Association reported that national restaurant sales were down more than $25 billion in March, and 3 million restaurant industry employees were without jobs. Before the pandemic struck, 2020 was anticipated to be a record year with more than $899 billion in projected sales, but now sales could be down by 25% or more compared to last year.
How will businesses survive? Restaurant industry professionals are not known for being idle, so it’s no surprise to see establishments big and small jumping into action as pandemic regulations halt normal operations. Those who are in a better position to survive will be those with cash in the bank who can leverage connections with lenders to provide necessary financial buffers. Some restaurants are encouraging customers to buy gift cards to help bring cash into the business. Others are setting up crowdfunding campaigns to keep employees on the payroll. And many have converted their dine-in businesses almost overnight to take out, drive thru or delivery models to sustain some cash flow.
Businesses large and small are rethinking their 2020 budgets to save cash and cut expenses wherever they can. For example, Chik-Fil-A took action to freeze hiring at their headquarters so that they could afford to support continued store operations. On the hotel side, Marriott is cutting top executive pay for 2020 by 50% to help sustain mission critical operations. Many small companies are applying for federal loans that can become grants if the organization keeps their staff employed during this tough time.
Another important shift is menu design. Restaurants are redesigning their menus to make them more flexible and economical now and in the future. Others have increased prices to help cover the gap in expenses. The standard timeframe for a new menu item to be tested and rolled out in many restaurants is six to nine months, but test products are now rolling out in a matter of weeks. It is amazing how nimble and innovative the restaurant industry is.
When it comes to marketing, budget cuts are a double-edged knife. For example, Marriott recently announced it has stopped all marketing efforts to save expenses due to COVID-19. However, it’s almost necessary in these times to use relationship marketing to keep in touch with employees and customers. We need to know that there is some part of our lives that will be normal when we can open our doors and go outside again.
Customers want to know what their favorite brands are doing in this time of crisis, how are they helping their employees, and how are they going to be there for their customers at the end of the day. As a customer, I want to have some things be normalized as I try to adjust to this new normal. Knowing that the restaurants are still there — serving food via curbside pickup and delivery — and helping their employees where they can to create a sense of hope is important for both short- and long-term recovery. Relationship marketing is a good strategy to sustain momentum and preserve normalcy where possible.
While, sadly, many restaurants will not survive the coronavirus crisis, there will be strongholds and there will be recovery. We can all play a role in helping this important part of our society and communities rebound. Purchase gift certificates from your local restaurants now if you are able to. Order food to go from your favorite spots that are offering delivery or pick up options. Tip as generously as you can when you pick up your takeout orders. And, let’s all be there for these businesses when they reopen and celebrate the hard-working professionals who are doing everything they can to keep serving.