Video transcript

Sharon Zackfia: Given the prolonged impact of the pandemic, the National Restaurant Association estimates 15% to 20% of restaurants permanently closed over the past year. That's more than 110,000 locations. Independent operators in the full-service segment were particularly hard hit as many were not able to pivot to off premises quickly or profitably, the latter reflecting the impact of third-party delivery fees. The end result has been Darwinian with big chains poised to emerge even strong post pandemic given strong brand awareness and more favorable terms with third-party delivery services.

As consumer demand surges, as we're already seeing indications of, that benefit of that increased restaurant spending will be spread across fewer players leading to the potential for higher post-pandemic average unit volumes across the space. On top of that, so far, full-service restaurants that have successfully pivoted to off premises appear to be holding onto much of that volume even as on premises sales rebound. We estimate that even holding onto half of the off-premises volumes achieved in the early innings of the pandemic would translate into 15% to 20% increases in averaging of volumes for surviving full-service restaurant concepts relative to pre-pandemic volumes.

While in off-premises only mode, many restaurants narrowed the breadth of their menus to minimize labor complexity and food waste in what was an uncertain demand environment. As a result, we expect leaner, more focused menus will emerge as a post-pandemic theme, which could create long-term positive ramifications for labor efficiency, food waste, speed of service, and order accuracy with the latter two likely translating into improved customer satisfaction.

With digital sales, including pickup and delivery, growing rapidly during the pandemic, restaurant concepts with strong digital ecosystems gained disproportionate market share. That could translate into a longer-term competitive advantage as those concepts harness customer data to personalize offers and incent behaviors, while lessening broad-based discounting, which would inherently create more pricing power. To widen the data funnel, we expect more concepts to introduce meaningful customer incentives and/or loyalty programs to encourage consumers to order it through restaurant's apps and websites.