Chains vs. Local Restaurants
By Austin Joseph
Money and Investing Writer
McDonald’s, Chipotle, and Dominos have done great during the pandemic while local restaurants have been struggling. Well capitalized food chains like Chipotle and Dominos have gained customers and added stores, while many local restaurants have had to shut their doors.
Large operations have the advantages of more capital, more leverage on lease terms, more physical space, and more geographic flexibility. The fast-food industry also has expertise with drive-throughs and their recent expansion toward carryout and delivery.
Looking into the numbers of how these food chains performed this summer, Chipotle more than tripled its online business sales in the second quarter while Dominos, Papa Johns, and Wing Stop all reported double-digit same-store sales increases in the third quarter compared with the previous period. McDonald’s also said U.S. same-store sales rose 4.6 percent in the third quarter thanks to their drive-throughs and promotions.
Delivery and takeout have been two of the main reasons that big restaurant chains have experienced recent success. For example, Brinker International Inc.’s Chili’s division introduced a delivery-only brand called Just Wings. This initiative created more than $150 million in sales in its first year.
The opposite is true for local restaurants. Between March 1st and September 10th, nearly three-quarters of restaurants on Yelp.com have closed. Even before the pandemic, frequent closing has always been a part of the restaurant industry. Restaurants typically run on slim margins. Some 60,000 restaurants open in an average year, according to the National Restaurant Association, and 50,000 closed.
The association predicts 100,000 restaurants will close this year. This also includes some smaller restaurant chains. Ruby Tuesday Inc. and California Pizza Kitchen have recently filed for bankruptcy protection. Starbucks, Dunkin Donuts, and Pizza Hut are already planning to close 1,500 stores between them in the next 18 months.
Contact Austin at austin.joseph@student.shu.edu