The recovery of Full-Service Restaurants

Full-service restaurants (FSRs) are struggling to recover from the pandemic, but there have been noteworthy improvements in recent months. Lockdowns are lifting, consumers' level of concern around COVID is decreasing, and sales are gradually trending upward.

How many people eat food purchased from FSRs?

Around 1 in 9 people eat food purchased from an FSR on any given day. While the lion’s share of food comes from supermarkets, FSRs are not an insignificant source of food for consumers.

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Consumers spend a lot more at limited-service restaurants than full-service restaurants.

Transaction data from our Intelligence dashboard shows that panel sales at full-service restaurants are down -23% YoY, while LSR panel sales are up 6% YoY for Q4 2020.

What’s driving the sales gap for FSRs compared to LSRs?

We looked at the two components that make up sales: transaction volume and check size. FSRs saw steeper declines in transaction volume, down about -20% YoY. Although FSR check size is slightly up YoY, these gains are much smaller than LSR check size gains. Before the pandemic, FSRs used to benefit from upsells on beverages, which is really a sit-down dining occasion and not as well-suited for off-prem dining.

Guests are still dining-in less and choosing take-out more.

When it comes to the proportion of dine-in versus to-go purchasing, prior to COVID, mobile geolocation data shows that about 75% of visits were dine-in visits (dwell time of 20 minutes or longer). That proportion dramatically dropped in March, April and May of 2020, and has never fully recovered to pre-COVID levels. Therefore, the sales gains that FSR is capturing appear to be more attributable to off-prem versus dine-in occasions.

 

What is driving FSR sales performance?

The images below are screenshots from Sense360's Intelligence dashboard, which uses machine learning to uncover top drivers of sales performance.

FSR is down year over year. The left column shows that, compared to pre-COVID, a big driver of FSR’s overall declines during the pandemic was depressed sales for family casual brands (such as Golden Corral), and eatertainment brands (such as Dave & Busters). Also, Late Night occasions were heavily down, and certain regions like Pacific and East North Central were particularly suppressed due to pandemic lockdowns.

But there have been improvements in recent months. The right column below looks at FSR performance in Q4 2020 compared to the previous quarter (when COVID was much more severe). FSRs are seeing wins in Family Dining recovery, certain regions like South Atlantic and West South Central, and also the Afternoon and Lunch dayparts.

 

Changing decision drivers are also benefiting restaurants.

Consumers are increasingly saying that they chose to eat at a restaurant because the food tastes better than grocery food, and they wanted it for social occasions. Also, people have less safety concerns about physically entering locations. When choosing specific restaurants to dine at, consumers are increasingly driven by good-tasting food and good service. People are less focused on wanting to support a local business, likely because the economy is starting to recover.

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How are individual FSR brands performing?

Texas Roadhouse is one of the best-performing FSR brands, with sales roughly flat year over year. Chili’s and Longhorn Steakhouse are down about -8%, and other brands like Applebee's are down closer to -20% YoY.

Why is Texas Roadhouse outperforming the market?

Looking at Brand Perceptions survey data, we see that Texas Roadhouse is highly-rated in survey attributes like fun atmosphere, high quality food, good alcoholic drinks, and good customer service. They underperform in deals/discounts and using technology, which have been strong attributes for growing LSR brands. Texas Roadhouse has leaned into some of the more traditional drivers for why people choose FSRs, and is now reaping the benefits.


How are FSRs performing on Third-Party Delivery?

Lastly, we looked at individual FSR chain performance in terms of market share on DoorDash. While Chili’s isn’t the largest casual dining brand overall, it is the single biggest FSR brand on DoorDash and has done quite well in digital sales. Chili’s parent company, Brinker, also launched virtual concept called It’s Just Wings, which has also done incredibly well in DoorDash sales. It’s Just Wings has grown to capture around 1% of all DoorDash spend within a year. It effectively has the same sized presence on DoorDash as Buffalo Wild Wings or Outback Steakhouse, even though it is a recently-launched virtual brand. This is a good case study for the potential of ghost kitchens and virtual brands to act as a new chapter in restaurant strategy.

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