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COVID-19

Most fast-food franchises have bounced back in short order

Mitchell Hartman Aug 5, 2020
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An employee directs drive-thru traffic at a crowded McDonald's in Scotland. Jeff J. Mitchell/Getty Images
COVID-19

Most fast-food franchises have bounced back in short order

Mitchell Hartman Aug 5, 2020
Heard on:
An employee directs drive-thru traffic at a crowded McDonald's in Scotland. Jeff J. Mitchell/Getty Images
HTML EMBED:
COPY

You might not be able to tell from their earnings reports, but franchise restaurant chains have actually been recovering pretty well.

McDonald’s profits last quarter were the chain’s lowest in 13 years. Yet the company reported that now revenue is almost back to pre-pandemic levels. We’ll get another glimpse into the industry Wednesday, when Wendy’s reports its results.

How franchise restaurants are doing depends on what they’re cooking — and how they’re connecting with customers.

David Blevins knows a lot of people are hurting economically, so he’s feeling pretty lucky.

“My business is actually excellent right now,” he said. “I wish I could say that about everyone.”

Blevins owns a Chick-fil-A franchise in Clarksville, Tennessee, about an hour outside Nashville. He’s closed his dining room to keep customers and staff safe. But he’s more than made up for the lost sit-down business. 

“We’re dependent on our drive-thru window, and also mobile ordering,” he said. “Customers who never downloaded the Chick-fil-A app or never used DoorDash or Grubhub are actually ordering now. And that’s a significant part of our business.”

With COVID-19 surging, consumers are fearful of going into stores and restaurants

So fast-food chains are doubling down on virtually contactless service, according to Jim Hertel, an analyst at Inmar Intelligence.

“It’s all about the drive-thru now [and] how can I minimize contact with other consumers, with store personnel?” Hertel said. “What better way to do it than have the food slid out underneath the window?”

The pandemic’s creating winners and losers in fast food, said R.J. Hottovy, consumer strategist for Morningstar. Ordering a pizza has gotten really popular.

“The quick-service pizza chains — I mean, they’re continuing to do very well in this environment,” Hottovy said. “Quarantine and shelter-in-place mandates really work to their favor.”

But, with so many Americans working from home — or not working at all — Starbucks and other chains that focus heavily on breakfast are struggling. 

“The specialty coffee companies — the ones that are really dependent on that morning commuter traffic — and McDonald’s, because they also have heavy exposure to that morning commuter, they’re hurting as well,” Hottovy said.

And the industry faces uncertainty. 

Restaurant sales stalled in July as COVID-19 cases started rising again, according to the NPD Group, a market research company. And millions of people just lost their extra $600 a week in federal jobless payments, which have propped up consumer spending during the pandemic.

COVID-19 Economy FAQs

So what’s up with “Zoom fatigue”?

It’s a real thing. The science backs it up — there’s new research from Stanford University. So why is it that the technology can be so draining? Jeremy Bailenson with Stanford’s Virtual Human Interaction Lab puts it this way: “It’s like being in an elevator where everyone in the elevator stopped and looked right at us for the entire elevator ride at close-up.” Bailenson said turning off self-view and shrinking down the video window can make interactions feel more natural and less emotionally taxing.

How are Americans spending their money these days?

Economists are predicting that pent-up demand for certain goods and services is going to burst out all over as more people get vaccinated. A lot of people had to drastically change their spending in the pandemic because they lost jobs or had their hours cut. But at the same time, most consumers “are still feeling secure or optimistic about their finances,” according to Candace Corlett, president of WSL Strategic Retail, which regularly surveys shoppers. A lot of people enjoy browsing in stores, especially after months of forced online shopping. And another area expecting a post-pandemic boost: travel.

What happened to all of the hazard pay essential workers were getting at the beginning of the pandemic?

Almost a year ago, when the pandemic began, essential workers were hailed as heroes. Back then, many companies gave hazard pay, an extra $2 or so per hour, for coming in to work. That quietly went away for most of them last summer. Without federal action, it’s mostly been up to local governments to create programs and mandates. They’ve helped compensate front-line workers, but they haven’t been perfect. “The solutions are small. They’re piecemeal,” said Molly Kinder at the Brookings Institution’s Metropolitan Policy Program. “You’re seeing these innovative pop-ups because we have failed overall to do something systematically.”

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