Insights Journal: December 2020

Dec 15, 2020 | Insights

Key Points: RR’s Operator Lockdown Survey

  • We were curious what multi-unit operators thought about the use of lockdowns to manage COVID so we conducted a survey with the following questions:
  1. Lockdown effectiveness? largely effective, somewhat effective, relatively ineffective, largely ineffective.
  2. Is there a better way than lockdowns? yes or no
  3. What solutions would be better?
  • Before we provide the answers, here is a breakdown of a relatively large, well diversified respondent base.

  • As we can see below, 71.2% of respondents indicate their opinion that lockdowns are either largely or relatively ineffective while 28.8% believe lockdowns are very or somewhat effective.
  • In general, there is a sense that there needs to be a more thoughtful approach to COVID that better balances freedom and economic reality with pragmatic approaches to safety.

  • Not surprisingly, operator respondents mostly want to keep with existing protocols as the primary line of defense.
  • Beyond this, many proposed a focus on protecting and isolating the vulnerable (elderly with existing conditions) while allowing those less vulnerable to self determine how best to protect themselves.
  • Additionally, some operators would like to see a more scientific approach to rule making while also demanding better testing methodologies.

Operators Weigh-In with their Thoughts

  • Every industry should have been able to partner with their states governing bodies to create industry specific guidelines and procedures to ensure the safety of the workforce and consumer while allowing ALL businesses to remain open. The practices that have been implemented are simply illogical and inconsistently applied. The example in Los Angeles was the most horrific example – a restaurant was required to shut down outdoor dining but a TV studio was allowed to set up an outdoor dining hall on the same parking lot. I adamantly believe that there has not been any difference in the results of states that locked down vs states which remained open. Pandemics always hit it 2-3 phases and only get resolved once a vaccine has been established. So nothing including shut downs were going to stop it. Government and industry should have collaborated to implement policies that kept folks working, limiting the loss of revenues and required government bail out needs.
  • Follow the science and facts – avoid politics – do not lockdown certain businesses while allowing others to remain open.
  • Early on, it was understandable to take a pause until we understood more about the virus and how to treat it. At some point though, the US has to honor citizen freedom to choose what is best for them. We are all aware of the virus and what we need to do to protect ourselves and those who are vulnerable. If you are vulnerable, take greater precautions such as staying home. If you are healthy, you should have the choice to face potential exposure by going out, with or without a mask, or stay home. If you do choose to venture out, you are acknowledging that you understand the risks and accept the consequences such as the availability of health care resources. Unfortunately, I doubt this will be the last serious epidemic that comes our way. We have to do a better job of balancing the public’s exposure to a virus and the economic and mental health of our entire country, not to mention citizen freedom. 

It is Restaurant Research’s opinion that our industry and country must not only be open to hear all the different view points, but also must constantly elicit new ideas and proposed solutions. This is the only way that we can work together to find solutions that balance our need to protect our vulnerable, our economy and our freedoms.

If you would like to weigh-in on our survey, click the button below and we will keep everyone updated on new ideas that come-in. Thanks!

Dunkin’ – RR Executive Summary

Dunkin’s DNA is built around speed & convenience as a beverage led (traditional drip coffee) to-go brand with a mid-level positioning above c-store & QSR but below Starbucks. Dunkin’s famous coffee, donuts & munchkins are legendary in core Northeast markets and the brand’s coffee authority supports its expansion into espresso (2018 upgrade), cold brew & frozen coffee. The brand’s coffee value equation includes: bean to grind fresh; brew fresh every time; short hold times; and free flavor shots. Notably, the ongoing roll-out of its new “smart brewers” promises to provide even higher quality and more consistent drip coffee products. Its ongoing brand repositioning includes: national value; a focus on speed & convenience (speed of Dunkin’); digital leadership (as reflected by the strength of its Perks loyalty program); an upgraded espresso experience; and “better for you” food items. Consistently, Dunkin’s menu strategy is to: grow & protect the core; leverage espresso-based drinks into a greater reach with a younger demo & new afternoon occasions; and drive traffic with innovation & national value (Go2s). The system is surviving post-lockdown and the average franchisee operating cash flow should approximate 80% of pre-lockdown target by the end of 2020 and unlike the 2008-2009 recession, franchisees are not having difficulty accessing capital. Having said all this, Dunkin’s positioning remains challenged by competitive coffee discounting from QSR & c-store players that drive traffic with discounted coffee which explains the brand’s push into higher-end espresso products as a way to help position the brand above the discounters. Dunkin’s challenge is to take share from Starbucks’ higher-end customers – a tall order given Dunkin’s functional brand experience based upon quick service and lower prices. Further, while its menu size has been paired significantly, the menu board remains crowded & complexities are aggravated by extensive promotional layers. In conclusion, Dunkin’s work is to translate a complete and thoughtful repositioning into sustainable traffic growth and this is no easy task as it requires the brand to compete with the ongoing coffee value war at the bottom while trying to cajole the brand’s core base of middle America to the upside.

Carl’s Jr – RR Executive Summary

Carl’s Jr. is a regional chain with a West Coast orientation and a large burger mix. Key brand attributes include: affordable burgers with double patties; premium Thickburger Angus platform; charbroiling for burgers & certain chicken sandwiches; bold flavor options (addressing its large exposure to the Hispanic demo); hand-breaded chicken tenders; made-from-scratch biscuits; and milkshakes made with hand-scooped ice cream. A better burger positioning at QSR prices compliments its very compelling $2.99 Charbroiled Double Deals. Chicken sandwiches include all-natural charbroiled chicken breast fillet options (fire-cooked flavor straight off a backyard BBQ grill) and healthful options appealing to a broader audience include: Beyond Famous Star & Beyond Sausage Breakfast Biscuits (plant based protein); lettuce wrap option; gluten free options; side salad (fry substitute); and free fresh veggie condiments. Notably, Carl’s post-lockdown prospects are favorable given an increased demand for drive-thru access. Further, Carl’s benefits from California’s severe dine-in lockdown policies which helps transfer restaurant market share to the drive-thrus. Also, a significant innovation ramp-up in 2020 helps increase trial/brand reach during a post-lockdown period when drive-thru QSR brands are in high demand. Having said all this, the chain’s historical pre-lockdown comp under-performance reflected: impact of high-end positioning during an extended period of consumer weakness & competitive discounting; disproportionately high unemployment rate among young hungry males previously targeted by Carl’s Jr.; smaller system scale which translates into less media share of voice; lack of digital access; and a lack of breakfast all-day availability. Further, high rent and labor costs on the West Coast make it difficult for the brand to sustain price value in a price sensitive market and, while the brand would like more recognition for its larger patty size, it is not clear that customers will pay-up for bigger patties. The brand’s smaller scale and share of voice necessitates elevated ad spend as a % of sales and makes it difficult to support development outside of core markets. Net unit count declines over the last 3 calendar years also reflect a relatively low sales-to-investment ratio. In conclusion, while Carl’s Jr. benefits as a drive-thru purveyor of tasty burgers in a post-lockdown world, the chain must ultimately deal with its need to compete around price value while navigating the elevated operating costs of the West Coast.

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