Delta Variant Puts Restaurant Rebound at Risk

Consumers Opt to Dine In

The restaurant industry’s pandemic recovery is at risk as the Delta variant spreads through the country, prompting more consumers to stay home. That could hurt Ruth’s Hospitality (RUTH), Bloomin’ Brands (BLMN), Denny’s (DENN), Texas Roadhouse (TXRH), Cheesecake Factory (CAKE), and other restaurant operators which had been gearing up for more dine-in business.

Restaurant executives are still optimistic they can maintain sales growth, but the industry may be headed for a bumpy ride. Restaurant visits in Los Angeles declined 17% for the week ending August 1. The number of consumers eating out was rising prior to the city reinstituting mask mandates. Sales in restaurants have been declining nationally since the end of July.

Restaurant Operators Mull New Pandemic Measures

Restaurants had to overhaul their business operations overnight as the pandemic resulted in shutdowns and social-distancing requirements. Now, restaurants are assessing rules regarding vaccinations as cities institute new policies.

Beginning in September, people dining in restaurants in New York City will need to show proof of vaccination, while Los Angeles is considering similar requirements in indoor public spaces. Some restaurant operators are also mulling whether they should bring back plexiglass shields, thermometers, mask mandates for employees, and other social-distancing measures.

Still Reason for Optimism

Despite the rise in COVID-19 cases, vaccination rules, and consumers’ reluctance to eat out again, some industry executives think they can keep sales up even if the pandemic worsens. They point to a stronger-than-anticipated recovery so far and their ability to weather the previous outbreaks.

Same-store sales in June at Denny’s, Cheesecake Factory, and Texas Roadhouse were up significantly compared to 2019 levels. Still, restaurant owners acknowledge that recovery will not be a straight shot. Until the pandemic is contained, the restaurant industry will likely experience fits and starts of recovery.

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