Financial recovery strategies for restaurants during COVID-19: Evidence from the US restaurant industry

Abstract

A research problem is presented from the inherent devastating effects of the COVID-19 pandemic on the restaurant industry: restaurants are now faced with mounting expenses and limited revenue due to mandatory closures of dining rooms. As an example of the problem for the industry, Darden Restaurants (NYSE: DRI) – the torchbearer of the U.S. foodservice industry – closed its 1800 restaurant dining rooms nationwide causing 60.0% decrease in same-store sales, due to the worldwidecollapse in consumer demand and spending, economic shut-down, restricted movement, and reduced intensity of food traffic, etc. Against the backdrop of crisis and recovery management, the purpose of this research note is to manage the negative impact of COVID-19 by identifying recovery strategies and relief efforts for the restaurant industry using Darden Restaurants as a case study. Data obtained from Darden executives revealed that revenue generation focused on carry out and an investment in people through adequate benefits are top strategies for financial recovery. Additionally, cost recovery methods such as preserving cash by delaying capital expenditures and reducing marketing spend are key survival techniques. The note uncovered these critical strategies to revamp the profit margins while leveragingeach brand's exclusive characteristics in order to remain financially competitive during and in the aftermath of COVID-19.