Kline says he thinks the timeline for recovery is on the shorter end of the spectrum, perhaps taking only a few months rather than the year or longer predicted by some estimates. If that is the case and the pandemic ends by late June or July, markets could recover rapidly, whereas a purely economic downturn, such as the Great Recession, takes a much longer time to rebound.
But Kline also notes that recovery may be dependent on how strict lenders and landlords are with restaurants’ payment schedules. Though many brands are having trouble making payments amid falling sales, if landlords and their banks allow restaurants to space their payments out over two years in exchange for signing extended leases, it may result in fewer closures. On the other hand, Kline says the industry might also see what he calls opportunistic closures, in which landlords want to move a specific business out of a space anyway and won’t negotiate payment terms. In this regard, large casual chains may fare better than smaller brands.
“It’s pretty easy for The Cheesecake Factory to say they won’t pay rent in April because they have a lot of leverage,” Kline says. “What is a landowner going to do with a Cheesecake Factory? Their stores are so customized that they would have to be knocked down to be repurposed, and they are massive, so it will be hard for landlords to fill that much space. They are going to fare a lot better than a local bakery without that kind of power.”
According to Black Box Intelligence, full-service chains saw a 60 percent decline in same-store sales, but some brands beat the average. For example, The Cheesecake Factory experienced only a 46 percent decrease in same-store sales in March and had managed to boost off-premises sales by 85 percent since the final quarter of 2019.