The United States, with almost 3 million coronavirus infections and 132,000 deaths, is leading on the board. As the pandemic has forced people to stay indoors and avoid unessential outings, businesses have been deeply impacted. One major line of business that faced the worst of its time is fast food chains and restaurants.
Recently, the largest franchise in the United States, NPC International, filed bankruptcy. The company has more than 400 Wendy’s and 1200 Pizza Hut restaurants across the United States. It filed for Chapter 11 bankruptcy in the Texas Southern Bankruptcy Court.
The chapter 11 filing said, “Deteriorating brand recognition has been further exacerbated by decreased menu innovation and the lack of a clear, long-term strategy by the Pizza Hut Franchisor to address the brand issues to provide a clear and differentiated identity.”
NPC International has put the onus on Pizza Hut’s inability to drive sales and growing competition from peers like Domino’s and Papa John’s. Though Wendy’s provided some franchise concessions to NPC, adhering to safety measures has been costly. NPC said in a statement that it is spending $750,000 per month extra for safety measures due to pandemic.
The fast-food chains and restaurants have been struggling since the start of the pandemic. The rising labour cost and unavailability of ingredients have contributed significantly to the problems of these companies.
Watch: Fast Food Chains That Are Struggling To Stay In Business
After NPC’s chapter 11 filing, Pizza Hut said that the filing was expected, and it would give them the scope “to create a better future for NPC’s Pizza Hut restaurants.”
Earlier, major chains including IHOP, Denny’s, and Starbucks, have announced more than 900 stores closure.
McDonald’s has recently earmarked $40 million for assisting its franchise partners as some of its franchise partners were eager to downsize or sell-off locations.
Other restaurant chains that are on the verge of closing down entirely or have filed bankruptcy include Belgian-based bakery chain Le Pain Quotidien, Italian restaurant chain BRIO Tuscan Grille, a famous seafood chain Sustainable Restaurant Holdings, a 42 years old restaurant chain in Southern California Sweet Tomatoes, a Tennessee-based steakhouse Logan’s Roadhouse, and Florida-based deli chain TooJay’s.
Big Fast-food Chains are Navigating Swiftly
It is evident that the pandemic has profoundly impacted the businesses of small fast-food chains and restaurants. However, the big chains continue to thrive amidst these unprecedented times. The big chains claim that cutting down on the menu and offering discounts on takeaways are attracting decent turnout to their places.
The big chains faced a significant slump in April. However, the business soon jumped to normal by the starting of May. For instance, McDonald’s reported a 19% decline in YoY sales in April. However, in May, it was just 5% behind. Carrols Restaurant Group’s Burger King locations faced a 33% reduction in sales in April. However, in May sales rose by 14.6%.
Experts believe that home deliveries are helping these big chains to recover quickly. Earlier, a Morgan Stanley report predicted that almost 13% of U.S. restaurant sales would be online home deliveries by 2023. Now it is saying that the future has come earlier. Due to the changing preferences of consumers, online deliveries have caught a monumental pace in the U.S.
Recently, the Internal Revenue Service had sent $258 billion worth of stimulus checks, and federal unemployment benefits are going to be run till the end of July. The higher liquidity in the United States and a lower number of active restaurants are helping the big chains to increase sales.
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However, the recovery in this sector has not been equal. While restaurants at urban locations are still struggling, sub-urban centres have started recovering. Similarly, the fast-food chains with drive-through services are witnessing a massive hike in demand. Whereas, the restaurants depending on nearby foot traffic are struggling as there has been an enormous disruption to people’s normal social lives during the pandemic.
Adapting to the changing times is easier said than done. Firms with deep pockets and extensive expertise may hedge money to sustain during these tough times. However, the smaller restaurants and fast-food chains are bound to feel the heat. Businesses now have to transform their business model as per the consumer needs at the earliest. A high standard of hygiene and adaption of home deliveries seem to be the way to go for now.