COVID-19 Economic Implications & Recovery Strategies on the June 1, 2020 Foodservice Industry Important disclosures can be found in Appendix 1
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Agenda 1. Review of the Last 2-3 Months 2. Recovery Pace & Outlook 3. What Does the Future Look Like? 4. Key Considerations 5. Q & A 3
Goals Insights to plan & forecast your business in the current environment Thought leadership on the “new normal” and where to pivot your business & products as the industry evolves Recovery strategies to be planning for 4
Macroeconomic Factors Unemployment Rate NFIB Small Business Optimism Index SA, y/y % Monthly, SA Total Unemployment Rate Leisure & Hospitality 115 45 Apr '20 110 40 Apr '20 35 105 30 100 25 20 95 15 90 10 85 5 0 80 2015 2016 2017 2018 2019 2020 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Source: BLS, FRED Source: NFIB / Bloomberg Consumer Confidence Food Service & Drinking Places y/y % change in 3M-moving-avg Conference Board University of Michigan 12% 160 Apr '20 May '20 2% 140 120 -8% 100 -18% 80 -28% 60 -38% -48.7% 40 -48% 20 -58% 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Source: US Census / Bloomberg Source: Conference Board / University of Michigan / Bloomberg 5
Chain Restaurants COVID-19 impact on demand • Industry started 2020 off strong Casual Dining Segment Same-store Sales Trends Average across public companies • Turning point was following weekend 10% of 3/13 0% • Same-store sales bottomed late -10% March/early April -20% • QSR bottomed down 30-40% Y/Y -30% • Casual dining bottomed down 70%+ Y/Y -40% • Sales began to recover in April, -50% showing week/week improvement -60% -70% • Bottom not as bad/long as initially -80% feared with recovery starting sooner 3/1 3/8 3/15 3/22 3/29 4/5 4/12 4/19 4/26 5/3 5/10 5/17 than expected Week Ending Source: Company reports 6
Chain Restaurants Key industry themes during COVID-19 • Higher check growth given more family/group orders • Menu innovation put on hold for now, but still important for later in the year • Restaurants on a limited menu during COVID likely continue with it for the near term • Staffing is a big near-term challenge for operators • Stronger sales trends in the middle of the country vs. coasts • Breakfast daypart pressured given lack of commuter traffic 7
Miles Driven Showing Modest Recovery Lack of commuter traffic is a key headwind for breakfast daypart Y-Y Change in Miles Driven n = 30 markets 60% 40% 20% 0% -20% -40% -60% -80% Source: StreetLight Data, CRC Estimates 8
What are distributors doing? • Largest distributors following a similar playbook during COVID-19 around inventory reduction, headcount/SG&A cost cuts, extended payment terms from suppliers, and selling into retail/grocery. • Distributor case growth declines bottomed in -50-60% range in late March/early April (magnitude varies by segment). US Foods and PFG saw 50%+ Y/Y declines in total case growth during April. • Suppliers were seeing worse trends vs. distributor out-the-door sales due to inventory de-load in April. • Distributors look to be rebuilding inventory (following cuts in March/April) as restaurant demand is starting to come back faster than expected. • Forecasting for suppliers has been difficult and sell-in and consumption have not matched. May volume pop may moderate as inventory is right-sized. • Distributors need to have availability of product to win share. 9
What is working for restaurants? • Strong off-premise business Casual Dining Off-Premise Growth vs Pre-COVID Weekly Sales per Unit • Digital presence 300% • Compelling value 250% • Family/group offering 200% • Food that travels/carries well 150% 100% 50% 0% -50% WE 3/8 WE 3/15 WE 3/22 WE 3/29 WE 4/5 WE 4/12 WE 4/19 WE 4/26 WE 5/3 Week Ending Source: Company reports, Average across public companies 10
Consumer Off-premise Usage Showing Improvement during COVID-19 How has your usage of restaurant delivery How has your usage of restaurant takeout or drive- thru changed as a result of coronavirus? changed as a result of coronavirus? (net change) (net change) March 19, 2020 April 7, 2020 May 7, 2020 March 19, 2020 April 7, 2020 May 7, 2020 -3% 8% 4% -15% -19% -4% Source: CRC Consumer Survey | May 2020 (n= 600) 11
What does recovery look like? • The current environment and variability across states makes it difficult to forecast the same-store sales outlook for restaurants as the pace/timeline for recovery depends on: • Pace of states lifting shelter-in-place restrictions • Restaurant seating capacity limits • Consumer willingness to return to prior habits • Sustainability of off-premise/delivery sales • Development of a vaccine vs. another outbreak • We see 3 potential scenarios that may play out over the next 6 months: base, bull, bear 1. Steady recovery through May and June as states reopen dining rooms with trends plateauing in 2H20 2. Continued sequential recovery through the rest of 2020 3. Choppy recovery due to continued capacity restrictions, recessionary pressures on the consumer, and risk for another outbreak 12
Same-store Sales Outlook by Segment Same-store Sales Outlook Scenarios by Segment 1Q April May June 2Q July Aug Sept 3Q 4Q Casual Dining Good -65% -45% -25% -45% -25% -15% -10% -17% -10% Base -8% -65% -50% -35% -50% -30% -25% -20% -25% -15% Bad -65% -55% -45% -55% -45% -40% -40% -42% -35% Quick-Serve Good -25% -5% 5% -8% 5% 5% 5% 5% 7% Base -3.5% -25% -15% -5% -15% 0% 0% 0% 0% 0% Bad -25% -20% -15% -20% -10% -10% -10% -10% -5% Local Good -65% -45% -25% -45% -25% -15% -10% -17% -10% Base -7% -65% -55% -40% -53% -35% -30% -25% -30% -20% Bad -65% -60% -55% -60% -50% -45% -45% -47% -40% Total Good -53% -33% -16% -34% -16% -9% -6% -10% -5% Base -6% -53% -42% -28% -41% -23% -20% -16% -20% -13% Bad -53% -47% -41% -47% -37% -33% -33% -34% -28% Source: CRC Estimates 13
Dining Room Reopening by State Capacity at Reopen Reopen Date Dining Room Alaska 25% 4/24 Arkansas 33%, Parties < 10 5/11 California Social distancing measures County-by-county Reopening Timeline Connecticut 5/20 Outdoor only, capacity TBD Florida 25% 5/4 Georgia 10 diners/500 sq ft 4/27 • Pace of recovery depends on reopening and Indiana 50% 5/11 Iowa 50% 5/1 capacity restraints Kansas Parties <10, 6 ft apart 5/4 Kentucky 33% 5/22 • ~30 states have provided timeline and guidance Louisiana Outdoor only 5/1 (many at 25% or 50% capacity, social distancing Maine Social distancing measures 5/18 (some counties) measures) Mississippi 50% 5/4 Missouri Social distancing measures 5/4 • Restaurants removing or roping off tables and Montana 50% 5/4 adding social distancing markers Nebraska 50% 5/4 Nevada 50% 5/9 • New Hampshire Outdoor only 5/18 Dine-in restaurant profitability during a time of Minnesota Outdoor only 6/1 limited capacity is a key watch-out North Dakota 50% 5/1 Ohio Social distancing measures 5/15 patio, 5/21 inside • Our analysis suggests that most independent Oklahoma Parties <10, 6 ft apart 5/1 restaurants are not profitable below 65-75% South Carolina Social distancing measures 5/11 capacity (even with good off-premise business) South Dakota Social distancing measures No stay at home order Tennessee 50% 4/27 Texas 25% 5/1 Utah 50% 5/1 Washington 50%, Parties <5 5/12 (some counties) West Virginia Outdoor only 5/4 Wyoming - No stay at home order Source: Public Information 14
Independent Restaurant Reopen Plan When do you plan to reopen your restaurant(s)? 34% 22% 19% 19% 4% 1% 1st half of May 2nd half of May June July Unknown; not sure at We do not plan to this point reopen Source: Independent Restaurant Survey, May 2020 (n= 275) 15
OpenTable Data – Reopen States Showing Directional Improvement Year-over-Year Change in Diners for Early Re-Open States -60% -65% -70% -75% -80% -85% -90% -95% -100% Source: OpenTable 16
OpenTable – Early Reopen States vs. US Florida Y-Y Change in Diners Texas Y-Y Change in Diners FL US TX US 20% 20% 0% 0% -20% -20% -40% -40% -60% -60% -80% -80% -100% -100% -120% -120% Source: OpenTable Source: OpenTable Georgia Y-Y Change in Diners South Carolina Y-Y Change in Diners GA US SC US 20% 20% 0% 0% -20% -20% -40% -40% -60% -60% -80% -80% -100% -100% -120% -120% Source: OpenTable Source: OpenTable 17
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