As People Make it Back to the Office, Restaurants See More Traffic

Restaurants Welcome Back to Work Traffic

The 2020 pandemic beat up many industries while causing others to rocket. Stock market investors endured sharp selloffs and, in many sectors, rapid recovery. Industries including hospitality and food were among the hardest hit as many restaurants saw their stocks crash during the Covid era. While some restaurants did what they could with either complete lockdowns, or a substantially reduced dining room capacity, and a low customer appetite for dining in, their business was still well-off the normal pace.

To make matters more trying for restaurants, the businesses in their neighborhood had employees working remotely — grocery store sales were up; lunchtime restaurant traffic was limited. According to Sentieo, publicly traded restaurant chains saw an increase in the price of only 4% in all of 2020 as compared to an 18% total return on the S&P 500.

In 2021, things look much better for restaurants. As many states, counties, and towns began to ease the previous restrictions and capacity limits, restaurant stocks began to climb back up. By some measures, restaurant stocks already have a year-on-year increase of 51.7%. Clearly, we’re getting past the turning point of the post-Covid era. Can we expect more growth in the sector?

“We’re absolutely seeing an increase in lunchtime traffic as well as maintaining delivery and to-go
business. We’re working on all cylinders right now.” – Andy Wiederhorn, CEO, FAT Brands

People are Doing What they Couldn’t do Before

Now at the tail-end of the Covid 19 era, authorities in the U.S. and many countries have begun to ease restrictions. People now do things they previously could not. For instance, they can now take their families to dinner, explore theme parks and spend in ways they were prevented from during the lockdown.

Earlier this year, investors began moving into recreational stocks like Disney (DIS). The result, between January 27 and March 8, DIS saw a 24% increase in market value before retreating. Full-service restaurants saw a similar spike as investors anticipated full dining rooms. People who had been restricting themselves to their homes now were expected to do things they were not.

Andy Wiederhorn, CEO of FAT Brands (FAT), responded to a listener question last week on lunchtime traffic. He was the guest at a Channelchek sponsored Virtual Roadshow. Wiederhorn responded, “some restaurants are at 120% of sales pre-covid.” Fat Brands is a restaurant franchising company that owns the Fatburger, Johnny Rockets, Buffalo’s Cafe, Buffalo’s Express, Hurricane Grill & Wings, Yalla Mediterranean, Ponderosa, Bonanza, and Elevation Burger brands. As it relates to traffic, Mr. Wiederhorn added, “sales over the past month are reaching all-time highs with some of the brands.” He responded more directly, “ We’re absolutely seeing an increase in lunchtime traffic as well as maintaining delivery and to-go business. We’re working on all cylinders right now.”

Recreational Dining vs. Regular Dining Out

Employers and government workers worldwide are starting to call back their staff members. This is coming as many governments and business organizations look to resume full onsite operations by late June. This is welcome by most. According to a study by Morning Consult, 65% of remote workers are ready to return to their offices to start resume working as they did before.

This adds to the good news for restaurants that relied in large part on local businesses adding to their lunchtime customers. It takes the remote workers who were preparing lunch in their kitchen and places them back in the running to a fast service restaurant.

Throughout the COVID 19 crisis, fast food and partial service food outlets struggled to survive. Some of them were already set up for take-outs. However, there have already been large spikes in companies that cater to workers stopping in for lunch. For instance, Mac Donald’s stock is up by 11%, just as the entire market surges around the same percentage. We expect that with a massive return to work as we hope soon, the dining rooms of these restaurants will see more large crowds. This will, in turn, boost their revenues massively and improve the market in general.

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