- Spending at big restaurant chains is up 2%, while sales at small chains and independent restaurants are still down 15%, according to a Bank of America report.
- A big chunk of the gap can be explained by the fact that chains are more likely to own fast-food and fast-casual locations, many of which built a thriving drive-thru and to-go business before the pandemic.
- Chains including Dunkin, Chipotle, and Domino's are already planning to buy up real estate currently occupied by struggling restaurants.
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Sales are returning to pre-pandemic levels at chain restaurants across the US. Independent restaurants are not as lucky.
Spending at big restaurant chains is up 2%, through the week of August 22, according to a new report from Bank of America. Meanwhile, sales at small chains and independent restaurants remain down 15%.
Much of the gap can be explained by the fact that fast-food and fast-casual restaurants are more likely to be owned by larger chains, while sit-down, dine-in restaurants are more likely to be independently owned, the report said. During the pandemic, restaurants focused on dine-in customers have struggled far more than locations that already had a thriving drive-thru and delivery business.
Other advantages enjoyed by chains include "scale, access to capital, and years of technology investments," according to the report.
The current disparity between chains and independents represents a significant improvement from past Bank of America reports in 2020. In mid-April, there was a percentage point difference of more than 30% in year-over-year sales performance. Bank of America was able to estimate sales at chains and independent restaurants by analyzing customers' aggregated credit and debit card data.
Chains are preparing to 'swallow up' independent restaurants
Bank of America says it expects some full-service restaurants to shut down permanently during the pandemic, which could boost sales at well-positioned sit-down, full-service chains such as Olive Garden's parent company Darden in the long term. As mom-and-pop independent restaurants shut down, customers will end up eating at chains that survive the pandemic more often, when they feel safe to dine out once again.
Chains including Dunkin', Chipotle, and Domino's have already started scoping out real estate currently occupied by doomed restaurants, Business Insider reported in August.
"The pandemic is going to result in many vacant restaurant spaces around the city, which will provide an opportunity for better-capitalized restaurant companies to swoop in and take over these spaces if they see a good business opportunity," Andrew Rigie, the executive director of the NYC Hospitality Alliance, told Business Insider.
"Unfortunately, many small business owners won't have the capital to start opening new restaurants," Rigie added.
Just 66% of independent restaurant owners were confident that they would still be open in October, according to a July survey of independent restaurant owners conducted by the James Beard Foundation and the Independent Restaurant Coalition. According to restaurant consultancy Aaron Allen & Associates, only about one in three independent restaurants may survive until the end of 2020.
Elliot Nelson, who owns 20 restaurants in Oklahoma and Arkansas, told Business Insider that a major chain has already approached him about taking over one of his restaurants' leases. Nelson said that he expects many independent restaurant owners to leave the industry altogether due to the pandemic.
"It's going to be hard to muster up the energy to want to keep going and do it again," Nelson said. "How would you feel if the biggest thing you worked really hard on was replaced by Taco Bell? So much of your soul goes into building unique stuff, and if you see it become so homogenous, that's especially heart-wrenching."
Read Business Insider's fully story on chains using the restaurant apocalypse as a chance to 'swallow up' independent restaurants here.
Irene Jiang contributed reporting to this article.
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