Eating places See New Covid Restrictions as U.S. Circumstances Hit Report Highs
Restaurants are facing a new wave of restrictions adding another barrier to their attempts to stay afloat and recover from the coronavirus pandemic.
The new daily Covid-19 cases in the US hit a record high of 88,521 on Thursday, according to a CNBC analysis of data from Johns Hopkins University.
“We are getting up a steep slope on the epidemic curve. I think you will find the cases accelerating,” said former Food and Drug Administration Commissioner Dr. Scott Gottlieb, in CNBC’s “Squawk Box”. “There are about 15 states where the positivity rate is above 10%. The number of reproductions is currently greater than 1 in all 50 states.”
The positivity rate shows the percentage of tests for the coronavirus that come back positive, while the reproductive number is a way to measure the ability of Covid-19 to spread. Both numbers indicate a rapid increase.
The surge in cases has resulted in some areas of the country imposing stricter restrictions on eating. As of Friday, eating indoors in Chicago restaurants will again be banned. In Denver, the restaurant capacity has been reduced from 50% to 25% and the last alcoholic beverage call is now at 10 p.m.
In Europe, which is facing a second high infection rate, there are again nationwide food mandates. France is re-entering the lockdown, which includes temporarily closed shops such as bars and restaurants that are not considered essential. Germany’s restaurants and bars will be closed for a month from November 2nd, some of them blocked.
As the pandemic has widened, restaurants and their unemployed employees are waiting for another stimulus package from the federal government. The paycheck protection program loans have now expired and the September unemployment rate of 7.9% means many consumers do not have the money they need to run restaurants.
Chain restaurants are recovering faster than independent establishments, but uncertainty about the increase in Covid-19 cases makes predicting their recovery even more difficult.
Starbucks, for example, said Thursday that 63% of its U.S. cafes have limited seating. The coffee chain expects to return to revenue growth in the same store by the end of the second fiscal quarter in March. However, this forecast assumes that the café’s seating and operating hours will be nearly full by this time.
Some full-service restaurant companies, such as Texas Roadhouse and Darden Restaurants, have directly linked their recovery in sales to eased dining restrictions.
And cold weather means that many restaurants that have relied on terrace dining will succeed. A Bank of America survey of 1,000 consumers found that 60 degrees Fahrenheit is the limit temperature for most guests. The Cheesecake Factory’s reliance on outdoor restaurants led the bank to downgrade its shares in August.
Getting to grips with the new restrictions will be easier for fast food chains, whose reputation for convenience and low prices has helped the sector recover faster than the broader industry. For example, at Yum Brands Taco Bell, 30 million customers ordered more groceries from thoroughfares in the third quarter than a year ago.
“We know that it is a fluid environment and as we see in Europe, it is simply not an environment in which we can predict and guide the year 2021,” David Gibbs, CEO of Yum, told analysts on Thursday . “We have confidence in our team based on how they have recovered so far and that we can focus on whatever gets in our way.”
And for the rare restaurant that thrived during the pandemic, new restrictions pose no threat. Wingstop saw sales surge during the crisis despite dining rooms remaining closed for more than seven months. The chicken wing chain instead relies on its technical investments and popularity with customers ordering food delivery.
“We highlighted the strength of our business model and achieved positive results throughout the pandemic. Revenue growth in the same business in the third quarter of 2020 was 25.4%,” spokeswoman Megan Sprague said in a statement to CNBC.