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Restaurant sales climbed as stay-at-home orders lifted across the US. Now foot traffic has slumped again.

Business Insider logo Business Insider 8/4/2020 ktaylor@businessinsider.com (Kate Taylor)
a kitchen with a glass of red wine: Travis Medlock, owner of Little Shop of Ramen, in the heart of Mariposa, California, on April 29. Genaro Molina/Los Angeles Times via Getty Images © Genaro Molina / Los Angeles Times via Getty Images Travis Medlock, owner of Little Shop of Ramen, in the heart of Mariposa, California, on April 29. Genaro Molina/Los Angeles Times via Getty Images
  • Restaurants saw sales steadily increase in April, May, and June after plummeting because of the coronavirus pandemic in March.
  • But progress stalled in July, according to NPD data.
  • While there are indications that sales are improving again, experts say the restaurant industry's period of "rapid recovery" is over.
  • Visit Business Insider's homepage for more stories.

Late March was one of the darkest moments the American restaurant industry had ever seen.

Restaurant customer transactions dropped by more than 40% between the end of the month and the early weeks of April, new data from The NPD Group showed.

The National Restaurant Association also found that by late March 3% of restaurants in the US had already permanently closed because of the pandemic and another 11% expected to follow suit over the following 30 days.

Customers returned to restaurants later in April, May, and June, through drive-thrus, delivery, outdoor dining and — in some cases — dining rooms. It led to chains including McDonald's, Starbucks, and Dunkin' reporting in earnings calls last week that sales improved week over week throughout the quarter.

Results in July, however, indicated the improvement in sales experienced by the industry was short-lived.

Restaurant transactions were down 11% in the week ending July 26 versus a year ago, a continuation of several weeks of generally flat sales, The NPD Group found.

John Davie, CEO of Buyers Edge, told Business Insider that the restaurant supply-chain company saw orders drop in July after months of recovery. Since Father's Day weekend — when sales reached their peak since the start of the pandemic — Buyers Edge had seen a roughly 15% drop in how much food restaurants were ordering.

"From the bottom at about the first week of April, we were seeing 5% to 8% increases every week up until late June," Davie said.

A resurgence of COVID-19 cases in parts of the US led to dining rooms shutting back down and renewed caution among customers. Restaurant recovery stalled, with Buyers Edge seeing some of the largest drops in orders in states where COVID-19 spiked, including Florida and Georgia.

Open Table data showed similar stagnation in the number of seated diners from online, phone, and walk-in reservations. Recovery hit its peak on June 21 — Father's Day — when diners were down just 41% compared to the year prior. In July, declines ranged from 50 to 72%.

a man sitting at a table in front of a building: The restaurant industry's period of week-over-week improvement appears to be coming to an end, experts say. Jason Kempin/Getty Images © Jason Kempin/Getty Images The restaurant industry's period of week-over-week improvement appears to be coming to an end, experts say. Jason Kempin/Getty Images

The period of rapid recovery is over

The NPD Group cautioned that the loss of the extra $600 in unemployment benefits could further hurt sales, something McDonald's executives also predicted.

"As we move into the weeks ahead the possibility exists for setbacks in restaurant customer transactions," David Portalatin, NPD's food industry adviser, said in a statement on Monday.

"Up until July 31, somewhere between 25 and 30 million Americans were receiving Federal Pandemic Unemployment Compensation as part of the federal government's CARES Act, which has provided $600 a week of enhanced unemployment benefits," Portalatin continued.

"These unemployment benefits translated to between $15-18 billion per week being put into consumers' bank accounts, and for context, total restaurant industry sales right now are a bit less than $8 billion per week."

Davie said he was "moderately optimistic" that customers had overcome the shock of the resurgence and were open to the idea of going out to eat wearing masks.

Buyers Edge has seen sales improve somewhat over the past two weeks, Davie says, but the swift sales increases the industry saw in April, May, and June were unlikely to return.

"I don't think we're going to see anything close to the rapid recovery we were seeing," Davie said. "I think it's going to be a more conservative recovery."

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