Closure tallies continue to vary for restaurants at this chapter of the COVID-19 recovery. Industry tracker Black Box Intelligence pegs the figure at roughly 12 percent of full-service restaurants. Datassential’s Firefly platform says 90,296 total (all sectors), with 7.4 percent of those being national chains, 13.3 percent regional, and 8.5 percent independent. Fine-dining accounted for 10.9 percent of the cut, casual dining 9.2 percent, and midscale 9.1 percent. Food trucks absorbed a 19.5 percent loss. Quick-service and fast-casual, respectively, trailed the pack at 7.9 and 7.2 percent. In all, nearly 9 percent of the sector’s 763,931 restaurants shuttered in 16 months.

As dramatic as these figures are, they pale in comparison to early day projections, which guessed as much as 30 percent of the restaurant industry would vanish. Additionally, recovery took hold quicker than some expected, with eating and drinking places registering total sales of $67.3 billion on a seasonally adjusted basis in May, according to data from the U.S. Census Bureau. Despite an unfavorable shift in the Father’s Day holiday, the industry posted its 13th consecutive week of positive same-store sales growth in the period that ended June 13, per Black Box.

It would be safe then, given what took shape, to label COVID a reset event more so than an apocalyptic one. Here’s a good illustration of how trends are moving.

In nominal terms, May’s sales surpassed February 2020 pre-pandemic volumes of $66.2 billion. However, after adjusting for menu-price inflation, real sales remain about 3 percent below where they were before coronavirus. So the industry’s recovery is not yet complete, in terms of a return to normal traffic.

Yet as we know, traffic was sliding before the crisis, too. Coming into COVID, off-premises sales increased nearly four times faster than dine-in business, accounting for about 80 percent of restaurants’ U.S. dollar sales growth over the last three years.

Traffic and on-premises business tracked in opposite directions. Dine-in’s share declined consistently from 73.8 percent in 2013 to 68.6 percent in 2019. It was 52.8 percent in 2020 (not a year that makes any clear sense to measure against).

As that 2020 figure proves, though, COVID did little to slow the rise of takeout/delivery/curbside and everything else outside the four walls.

In the U.S. during COVID, delivery’s share of foodservice sales doubled to more than 15 percent, according to financial services company Rabobank. Per Datassential, 90 percent of guests said they changed delivery behavior as a result of the crisis.

With restrictions lifting around the country, consumers have a chance to recalibrate. And while they’re clearly doing so (the Census data) pent-up demand has hardly cashed out. According to the National Restaurant Association, 50 percent of adults said they are not eating on-premises at restaurants as often as they would like (survey data from June). That was down significantly from the 83 percent who reported similarly during the early weeks of the pandemic. But still slightly above January 2020 pre-pandemic marks of 45 percent.

However, in the past year-plus, restaurants across every segment expanded off-premises options on survival terms, and customers embraced these additional points of access. An earlier Association study showed 53 percent of adults believed purchasing takeout or delivery food was now essential to the way they live.

In turn, it’s not surprising only 28 percent of adults now say they are currently not ordering takeout or delivery from restaurants as often as they would like. Increased usage of off-premises foodservice is baked into the cake for many consumers, the Association said. “And this trend is likely to continue well beyond the end of the pandemic.”

What does this mean for sit-down restaurants? Firstly, guests are still clamoring for both sides of the transaction coin. Could you say that before? We’re nowhere near the recovery apex (and we’re not talking about the labor and hiring shortages at hand and how that might be limiting hours, service, etc.)

A good way to measure this would be to examine what happened in the cinema/box office industry pre-COVID. Trends suggest there’s a cap on consumers’ trade-off between social/immersive experience and convenience. Despite wide availability of streaming, which can be used as a proxy for delivery in this example, the number of tickets/admission remained largely steady over the years. Concert sales didn’t suffer from the wide availability of CDs or streaming, in another precedent.

In Rabobank’s view, delivery’s main threat is as a substitute for restaurant spending driven by convenience. Not so much when the experience factor is the selling point.

It believes, for brands where consumer experience and personal connection reign, delivery will inch back in the coming years to a relatively marginal part of the business.

Before 2020, total foodservice growth was flat or lower in 10 of the largest global foodservice markets over the last three years compared to the previous three-year period. This even as delivery’s share of total sales in these areas jumped 250–300 basis points.

Just look at Amazon for why this might matter. The behemoth’s share of U.S. retail sales increased from 2.5 percent in 2015 to 5.9 percent in 2019. It outgained the category by 24 percent over that stretch.

However, it didn’t present much impact on the overall retail sales growth trajectory, as U.S. figures posted a 3.3 percent CAGR during this stretch—largely in line with the 3.8 percent CAGR over the 2010–2015 window.

Generally, disposable income, GDP growth, and unemployment levels have a bigger impact on restaurant growth. Domestic foodservice consumption showed a nearly plus-74 percent correlation with per capital personal consumption expenditure over the past 25 years, including less than 90 percent correlation during recessionary stretches, Rabobank said.

As a result, the food-away-from home share of total disposable income increased at a fairly steady rate over the last 10, 20, 40 years—from 2.2 percent in 1979 to 6.3 percent in 2019.

To dress this all down, people are going to spend money on in-restaurant experiences again. Any off-premises gains made during COVID might alter it somewhat, but it’s not going to materially change the draw of full-service restaurants.

In fact, it could signal the opposite. Particularly near-term as people put both hands back on the steering wheel for the first time in months.

According to Bloomberg, 82 percent of urban centers saw more people move out than in during COVID (compared to before). Ninety-one percent of suburban counties reported more people moving in than out.

And what often resides just outside those city-center markets? Casual dining—a segment that adjusted to off-premises pivots during COVID better than many of its independent counterparts. From virtual brands to curbside tech to stores redesigned to serve to-go options, casual chains, in general, saw massive off-premises gains during the pandemic. Beyond the obvious (guests had nowhere else to go for the food) this provided sit-down concepts a chance to introduce a new occasion into core customers’ habits. And it also reintroduced these brands to lapsed users who might have preferred convenience-driven options before. Lastly, casual chains simply entered the consideration set for a new generation of guests. Either because other options were closed during heightened restrictions. Or because casual brands opened ordering channels on platforms where previous core users weren’t (say third-party delivery for a brand that didn’t tout it previously).

And so you saw concepts tighten menus, improve execution, and lean into their cores, from Outback’s simplified menu to a new guest experience at Red Robin to Darden calling the COVID reset a “once-in-a-lifetime opportunity.”

“The most prominent and the most significant thing we’ve done is streamline the menus and our processes and procedures, and that’s forever,” CEO Gene Lee said in June.

In a lot of ways, it’s opposite of what happened six or seven years ago when casual brands tried to chase millennial customers and drifted from their centers. The result being the broad retraction of an overleveraged sector chasing relevancy.

And then there’s the sudden one-two punch of off-premises and trying to figure how sticky the business really is.

Q4 (announced last week) sales outside the four walls mixed 33 percent at Olive Garden, 19 percent at LongHorn, and 16 percent at Cheddar’s Scratch Kitchen thanks to technology enhancements to online ordering and the introduction of to-go capacity management and the “Curbside I’m Here” notification, the company said.

In a telling remark, CEO Gene Lee said there hasn’t been cannibalization with dine-in, meaning, off-premises customers are using the restaurant as a home meal replacement as opposed to replacing a dine-in visit. Again, it’s an introduction of Olive Garden to a wave of new guests brought on by COVID. Sixty-four percent of Olive Garden’s to-go orders were placed online in Q4, and 14 percent of Darden’s total sales were digital transactions.

Earlier in the pandemic, Lee guessed off-premises would flame out in time for casual-dining users. “I think you’re right, and I was wrong,” he told investors last week, “that some of this off-premises was stickier than what we thought. And I think a lot has to do with the capabilities we created through the pandemic, and make it a lot less friction. But I’m searching, we’re searching, for equilibrium, understanding when and where the business is going to is going to come from. I think we’re still in the early innings of that. I think we still got a lot more upside.”

Texas Roadhouse, like Darden, didn’t invest in third-party delivery; it poured resources into carryout and curbside. Systemwide, to-go pushed more than $23,000 per week in Q1 for the steakhouse leader, or 18.7 percent of total sales. The brand rolled an app upgrade, which made it easier to order and pay for to-go, get on a waitlist, and use offers and gift cards for pickup. It implemented pickup windows in some stores and tested “a couple” of drive-up windows (not drive-thru) where customers can text, stay in their car, and grab food from the hand-off point. 

Back in February, Outback said 80 percent of its customers for virtual brand Tender Shack had never ordered from any of Bloomin’s legacy brands, Carrabba’s, Fleming’s, and Bonefish Grill included.

At Applebee’s, off-premise comparable same-store sales in Q1 increased by 122.7 percent. In March and April, restaurants averaged $54,000 per week. As dine-in came back, off-premises volume maintained between $17,000–$18,000.

This past April, Applebee’s sales mix consisted of 67 percent dine-in, 20 percent Carside To-Go, and 13 percent delivery.

The picture is clear, and it’s a casual-dining conversation that lends credit to the benefit of scale again—something that wasn’t as vivid in a pre-COVID operating arena. But then there’s this, as well: “The convenience driven occasion has very clear drivers, but that dine-in occasion is about connection, it’s about indulgence, it’s about being served and being relaxed and a little escape from home,” brand president John Cywinski said in May. “We love our position on that front.”

Is a casual-dining resurgence in order? Have customers started to give some of America’s iconic sit-down brands credit where they weren’t before? Did COVID, and its after-shocks, breathe life into legacy dining?

The favorites

The American Customer Satisfaction Index released its 2020–2021 Restaurant Study on Tuesday. The company based the results on interviews with 19,423 customers. They were asked to evaluate recent experiences with the largest companies in terms of market share, plus an aggregator category consisting of “all other” (or smaller) companies in those industries.

It’s been quite a stretch for LongHorn, which shares the top spot with Texas Roadhouse and sister brand Olive Garden. The 533-unit chain captured a record $118 million in segment profit in Q4, or a 982.6 percent rise compared to 2020. The concept also saw same-store sales grow 9.9 percent, 16 percent, and 15.5 percent in March, April, and May, respectively.

LongHorn was, in actuality, better suited for COVID shifts than Olive Garden in some respects. If for no other reason than logistical layouts. Olive Garden typically has twos, fours, and sixes in regards to seating options. It offers tables for large parties and boasts an average party size of 2.3. LongHorn, though, is essentially one big box. Olive Garden is comprised of rooms, nooks and crannies, and shorter booth backs. And thus, it couldn’t create the same yield adhering to local jurisdictions as LongHorn out of the restrictions gate, or develop the same percentage occupancy.

As a result, off-premises sales boosted LongHorn’s recovery by hitting $28,653, or 41 percent, of pre-virus volumes by the third week of April 2020—nearly four times higher than early March. And it was also starting from a lower level than Olive Garden, which had its own fulfilled delivery program and a more concerted to-go operation in general.

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Either way, you can credit LongHorn’s rise to improvements made well ahead of COVID. LongHorn headed into 2019 as a tighter, more operationally sound concept. It spent the previous year slicing its menu more than 30 percent, removing complexity throughout the system, increasing the size of steaks, and investing heavy in quality.

Darden COO Rick Cardenas, when asked about LongHorn’s run, said it began in earnest about five years ago “since Todd’s come back and he and his team have just done a great job of improving the value perception.”

After a two-year stint as chief operations officer of Ruby Tuesday, Todd Burrowes returned to LongHorn as president in July 2015. He served as EVP of operations at the steakhouse from May 2008–June 2013 and was a member of Darden’s team since 2002.

Burrowes’ homecoming ran alongside Darden’s early efforts into a full-throttle simplification project, or back-to-basics operating model, as the company refers to it. In 2014, when Darden began the process, it was designed around a rather uncomplicated point: Grow guest counts with better execution through simplification. A focus on food, service, atmosphere and stronger employee engagement.

LongHorn, in particular, worked to create promotions that leveraged core menu items that shift mix favorably. The brand, in another separator from Olive Garden, benefits from a strong add-on sales business.

Back in Q3 2019, as a case point, LongHorn saw inflation tick up, mainly due to beef. Cost of sales as a percentage was unfavorable compared to the rest of Darden’s concepts, by about 10 basis points. However, LongHorn’s quality efforts pushed more customers toward higher-end steaks, which boasted a higher cost of sales. A T-bone steak versus a sirloin, and so on. LongHorn’s investments shifted the conversation. Darden nudged customers where it wanted.

That quarter, LongHorn achieved a record high steaks cooked correctly score. The fact that’s a metric at Darden tells you all you need to know.

And all of these held up well during the COVID hammer.

The good news for full-serves is that customer experience benchmarks were up across the board. It appears customers appreciated the COVID lengths brands had to take.

“People are slowly starting to enjoy sitting down at restaurants again, but don’t discount the value of convenience,” David VanAmburg, managing director at the ACSI, said in a statement. “During the pandemic, folks got a taste for what it’s like to have food from their favorite restaurants delivered right to their door. And now that they’ve gotten used to this service, there’s no going back. Restaurants need to continue to give customers all the options they’ve become accustomed to over the last year and a half. If not, they might grab a bite somewhere else.”

And further proof of that here:

What appears clear is guests are eager to get back to dining out. It’s now up to brands to meet that demand with something that lasts beyond a trial visit. And in a lot of ways, this is an opportunity inspired by the pandemic. A chance to reset.