The restaurant industry has been one of the most impacted by the coronavirus pandemic with governments from coast to coast putting some limits on how they operate. That has meant the advertising category has taken a hit too. But the headwinds may be lightening up somewhat as more restaurants adapt and Americans get accustomed to eating outside or in widely spaced interiors. The NPD Group reports the major restaurant chains just had their best week since March.
In the week ending August 16, customer transactions were down 9% compared to one year ago, the smallest rate of decline since pre-COVID. The worst week was in mid-April when year-over-year numbers were down 44%. “Although transactions are still down, the move into the single digits is a positive sign for the U.S. restaurant industry,” said NPD analyst David Portalati.
Things were better for the major quick-service restaurant chains, which represent the bulk of industry transactions, with transactions down 8% in the week ending August 16, compared to a year ago. Getting customers to sit down in full-service chain restaurants remains more difficult. NPD says even though mandated dine-in closures are slowly being lifted, transactions at full-service chain restaurants declined 19% versus a year ago. That segment has been especially hard-hit with sales down as much as 76% during mid-April.
The improving trends at fast-food chains have helped stimulate ad spending in recent weeks, with summertime typically among the segment’s strongest periods. McDonald’s announced in late July that it was boosting its marketing spending for the remainder of the year by $200 million. That is a turnaround from the second quarter when McDonald’s cut U.S. marketing spending by 70%. “We chose to conserve our resources until the situation stabilized,” CEO Chris Kempczinski said. “These funds will now be reinvested in Q3 and Q4.” He said the $200 million added was incremental to that money that was pushed back in the second half of the year, equivalent to one additional month of media in every owned market. “These actions will result in a sizeable increase in our marketing spend for the balance of the year,” he told analysts.
Wendy’s, too, said it was increasing its marketing efforts, including a $15 million allocation to promote its breakfast products as more people begin commuting to work. “As mobility improves, coupled with our incremental investment in marketing, we believe that this business has a ton of upside moving forward,” CEO Todd Penegor said last month.
“Although we’re stuck in neutral for now, I firmly believe there is still a lot of upside recovery for restaurants,” said Portalati. “My belief is rooted in one reality – consumers are not willing to give up on the convenience and experience a restaurant meal brings to them and their families regardless of the barriers.”
Some radio groups have also found new ways to work with restaurants, even when traditional ad buys were off the table. Townsquare Media’s interactive division has found success working with restaurants to adapt their websites to use online ordering and curbside pickup platforms. CEO Bill Wilson said on a recent conference call that especially in some of the smaller markets where they operate, restaurants in the past have not seen the value in focusing on a delivery business. But that’s changed during the pandemic. “Now more than ever, small and medium-sized businesses need to strengthen and maintain their online presence,” he said.