December 18, 2020
Demolition Man is a 1993 American science fiction action film starring Sylvester Stallone, Wesley Snipes, and Sandra Bullock. Stallone is the risk-taking police officer and Snipes the evil crime lord. Both have been cryogenically frozen for crimes in 1996 and are thawed in 2032. The dystopian society has changed, and all crime has seemingly been eliminated. The story alludes to many other works including Aldous Huxley’s 1932 dystopian novel Brave New World and H. G. Wells’ 1899 The Sleeper Awakes. The film was released in the United States in October 1993 and earned a total of $159 million. One of the humorous side notes was how in the future Taco Bell is the classy restaurant that everyone wants to go for sit down dining.
While the Taco Bell reference was supposed to be tongue-in-cheek in 1993, it may be closer to reality than you think. The pandemic is splitting the restaurant industry in two. Big, well capitalized chains like Chipotle and Domino’s Pizza are gaining customers and adding stores while tens of thousands of local eateries go bust. About 17% (110,000) of America’s restaurants have already permanently closed this year. One survey of open restaurants found a 36% drop in revenue and 83% expects sales to be “even worse” over the next three months, and 37% of restaurants said it is “unlikely” they will be open in six months from now without additional government help.
While that is true for small locally owned restaurants, the reverse is true for the large national chains. Larger operators generally have the advantages of more capital, more leverage on lease terms, more physical space, more geographic flexibility and prior expertise with drive-throughs, carryout, and delivery. Chipotle more than tripled its online business sales in the second quarter while Domino’s, Papa John’s International Inc. and Wingstop Inc. all reported double-digit same-store sales increases in the third quarter. McDonald’s also said U.S. same-store sales rose 4.6% in the third quarter. That included a rise in the low double digits during September, its best monthly performance in nearly a decade. Just as with household income, the food divide continues to widen.
Thoughts: With indoor seating either banned or limited, local restaurants have been forced to switch to curbside or drive thru to stay afloat. Most of these restaurants do not have suitable locations for drive thru and curbside still requires interaction. Add to this the inconvenience of either calling ahead or sitting in the parking lot waiting for a meal, then driving home and (usually) eating cold food. While that works with gazpacho, most entrees are not the same. When it comes to my favorite classy restaurants, I go there because they are not “fast food.” Darwin might call this survival of the fittest. The key is finding rapid ways to adapt. Follow the science. Change is coming and it starts with you.