(Bloomberg Opinion) -- As many states ease the restrictions put in place to slow the spread of Covid-19, shoppers are beginning to trickle back to malls, restaurants and hair salons. But even as they venture away from their living rooms for those activities, many who hold office jobs are still working from home. This abrupt, widespread adoption of telecommuting has roiled the restaurant industry, and could continue to do so if large swaths of workers end up settling into this model on a more routine basis — particularly when it comes to certain niches. Breakfast is a prime example.
U.S. restaurant traffic in the morning hours suffered from a steeper initial drop during March and early April than was seen at lunch or dinner. Even now, breakfast is recovering more slowly than those other mealtimes. This almost certainly reflects the fact that commutes have disappeared for legions of workers. After all, it doesn’t make sense to take your regular spin through the McDonald’s drive-thru lane when you’re not already in the car en route to your cubicle. And a ritual pop-in to the Starbucks near your subway stop is no longer convenient.
The dent in this business is an unfortunate development for the restaurant industry. The morning hours had been a relative bright spot for years, making up for declines or tepid growth later in the day. Breakfast also tends to be an especially profitable category for fast-food restaurants because the ingredients are relatively cheap.
We’ve gotten some early hints as to how this dynamic is affecting major restaurant chains. Executives at Dunkin’ Brands Group Inc. said on the company’s latest earnings call that they had seen a drop in business in the crucial 6 a.m. to 9 a.m. time frame, even as things had picked up between 10 a.m. and 2 p.m. Jack In The Box Inc. said in May it wasn’t putting much advertising behind breakfast menu items because with fewer commuters on the road, it doesn’t make sense to do so. McDonald’s Corp. has said breakfast “will be the most challenged” eating occasion to recover as states start to reopen, and Starbucks Corp. said last week that it expects the pandemic to deal a blow of up $3.2 billion to its sales in the current quarter, a financial wound that reflects a number of Covid-19-related challenges, including the shortage of worker bees stopping by their cafes as if on autopilot.
Meanwhile, Wendy’s Co. has said its launch of a breakfast menu in early March “performed extremely well out of the gate,” but the disruption of diners’ morning routines certainly won’t make it easy for the chain to keep up momentum. It’s a tough break for a company that had been counting on early birds as a cornerstone of its growth strategy.
While independent and chain restaurants alike are looking to delivery to make up for some of the business they’ve lost in their dining rooms and carry-out windows, I wouldn’t count on that model to be much of a savior at breakfast time. Breakfast orders tend to have low average checks, so consumers might balk at paying delivery fees and tipping a driver for such a small purchase.
It’s unlikely that working from home will be quite as ubiquitous a year or two from now as it has been in these early months of the pandemic. But a portion of the nation’s workforce is discovering they can do their desk-jockey jobs just fine without sitting in traffic or enduring a shoulder-to-shoulder train ride each morning. If given the choice by their employers, as a number of companies are doing, they won’t go back to that daily slog.
This change will necessarily guide how restaurants think about everything from where they locate their outposts to how they allocate labor throughout the day. It also should hasten existing efforts from Dunkin’ and Starbucks to offer menu items and promotions to make them more of an all-day dining destination.
Of course, the embrace of working from home is nowhere near the largest challenge restaurants face due to the Covid-19 crisis. A deep recession has the potential to decimate demand, causing diners to make fewer trips to restaurants overall and to rely on discounts and promotions when they do. Pandemic-related changes loom as even more existential risks. Social-distancing rules and norms will keep dining rooms operating at far lower capacities than they were designed for, threatening the so-called four-wall economics of a restaurant. Health concerns may keep some diners from feeling safe enough to hit up these eateries in the first place.
Still, the smaller but significant work-from-home effect on dining is a clear illustration of the breadth and complexity of problems the entire restaurant industry is confronting, and the extent to which every corner of the economy is encountering weird domino effects that threaten businesses — from dollars to doughnuts.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Sarah Halzack is a Bloomberg Opinion columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post.
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