Managing Transitions: Lessons From ERCOT

Drive-Thru, Takeout, and Delivery Focus Poised To Accelerate in Response to COVID-19

Published on April 16, 2020

This piece is the third installment of an ongoing series of Sigma Logics Consulting perspectives on the impact of and responses to the crisis.

We’re publishing a series of insights and perspectives on how COVID-19 is impacting the food and beverage landscape. Our goals are to synthesize retailer, foodservice and consumer packaged goods company responses during this unprecedented period; to help our clients in the food and beverage industry monitor key developments; and to share best practices. This pandemic is first and foremost a humanitarian crisis. We at Sigma Logics extend our heartfelt sympathies to all who are affected.

As restaurants are forced to shutter their doors due to the impact of COVID-19, many have turned to the safe and efficient strategy of drive-thru, takeout, and delivery to continue servicing customers. The Centers for Disease Control and Prevention identifies drive-thrus as a safe method for distributing food given the low probability of COVID-19 transmission, provided that restaurants follow FDA guidelines for food distribution. For those with existing drive-thru service, COVID-19 has simply accelerated existing market trends:

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  • Even before COVID-19, restaurants with a drive-thru experienced 60%-70% of sales from the drive-thru
  • Many leading quick service restaurant (QSR) chains are reporting that drive-thru now comprises 90%+ of sales post COVID-19

Yet today, only 20% of U.S. restaurants have drive-thru operations — and those foodservice operators are experiencing a much more acute impact from the crisis. According to an April 6 NPD report, activity for the week ending March 29 compared to a year ago differed dramatically across foodservice segments:

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  • QSR transactions are down 40% (heavy drive-thru/takeout/delivery presence)
  • Full-service restaurant (FSR) transactions are down 79% (light drive-thru/takeout/delivery presence)

Not surprisingly, the focus on drive-thru, takeout, and delivery has been accelerated in the industry. The foodservice industry has a rich history of innovation and adapting to trends, and the current crisis is no exception.  Examples include: 

  • Creating previously nonexistent drive-thru operations in parking lots
  • Offering takeout / delivery services for the 1st time (e.g. Alinea)
  • Transforming valet parking spaces into takeout parking spots 
  • Simplifying menus to streamline operations (e.g., McDonald’s eliminated its all-day breakfast)
  • Targeting drive-thru promotions (e.g., Wendy’s giving away free a Junior Frosty for every drive-thru order)
  • Offering more do-it-yourself options (e.g., take and bake, meal kits)
  • Forming new partnerships with delivery services (e.g., Grubhub, DoorDash, Uber Eats) and expanding delivery zones

By extension, foodservice suppliers should be paying close attention to trends in how restaurants are adapting, innovating and differentiating themselves in this changing landscape. Foodservice suppliers should act to lock in business with the projected “winners” and focus innovation efforts on food to-go items in order to ultimately weather the storm. 

Sources: ABC, Datassential, The Wall Street Journal, NPD Group, CNBC, Forbes, QSR magazine, company websites, Sigma Logics research and analysis

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