Your guide to the state of the pizza industry during a time of crisis
There has never been a time like the pizzeria industry is experiencing in 2020.
It has shown through a resiliency to adapt, shift and thrive amidst uncertainty. This moment has created a time of reflection to streamline business and institute operational strategies that will have a lasting impact.
In mid-March, the COVID-19 Pandemic prompted many state and local governments to institute stay-at-home mandates, close businesses and schools and cancel events. Restaurant teams were deemed essential workers to help feed America. Though restaurants were permitted to operate, with closed dining rooms, many had to change the way they do business.
In August, we conducted a COVID-19 Pizzeria Industry Impact Survey to track just how pizzerias across America have been impacted and how they have adapted to the persistent COVID-19 pandemic. Pizzerias make up an estimated 92,000 of the more than 650,000 restaurants in the United States.
Restaurant Industry’s Grim Reality
To better understand where the pizza industry stands, let’s first examine the restaurant industry as a whole. The pandemic continues to wreak havoc on the stability of restaurants.
The National Restaurant Association (NRA) reported that between March and July, the foodservice industry lost $165 billion in revenue and is on track to lose a total of $240 billion by the end of 2020. In August, restaurant sales were down 34 percent from the previous year. The NRA has also estimated that one in six restaurants (at least 100,000) is closed permanently or long-term. Its recent COVID-19 six-month impact survey revealed that restaurant staffing levels are only 71 percent of where they would normally be and nearly 3 million employees are still out of work.
In a September release, NRA President and CEO Tom Bené said, “For an industry built on service and hospitality, the last six months have challenged the core understanding of our business. Our survival for this comes down to the creativity and entrepreneurship of owners, operators and employees. Across the board, from independent owners to multi-unit franchise operators, restaurants are losing money every month, and they continue to struggle to serve their communities and support their employees.”
Since the shutdown in March, Pizza Today had received numerous reports of many operators experiencing significant sales growth during the pandemic. We wanted to see if this was an industry-wide occurrence. We reached out to pizzeria operators to gather a consensus of where pizzerias stand amidst a global pandemic. Roughly 650 respondents shed light on their COVID-19 experience.
Let’s examine a snapshot of the pizzerias surveyed and their concept details before the COVID-19 pandemic:
- 88 percent of pizzerias surveyed have been open for three or more years. Nearly 63 percent of those have been in operation for 10 or more years.
- The top three concept segments (in order of largest percentage) include Casual Dining, Fast Casual/Build-to-Order and Carryout and Delivery Only.
- 78 percent were dine-in concepts. Of the pizzerias with seating, 42 percent had more than 50 seats pre-COVID-19 and over 20 percent seated more than 100.
- 88 percent had fewer than 50 employees.
Let’s dive into what has happened to pizzerias during the pandemic. There is evidence that while the pizzerias were dramatically affected by COVID-19, there are also beacons of hope. Be sure to read the first-person accounts of this uncertain time from pizzeria operators around the country.
Nearly 70 percent of pizzerias experienced a closure of some sort during the COVID-19 pandemic. While 43 percent of pizzerias experienced a closure of less than a month, another 31 percent closed for two months or more. As of August, more than half of American pizzerias operated without any dine-in business and only 2.6 percent were operating at 100 percent dine-in capacity. With a predicted fall/winter resurgence of the virus, dine-in remains to be a gray area in many business models.
Staffing Challenges Persist
Industry-wide staffing has been significantly difficult. From March until August, 44 percent of operators furloughed or laid off employees. Of those that reduced their workforce,
38 percent of those surveyed lost 50 percent or more of their team.
There is a bright spot in the employment forecast —72 percent of operators have indicated that they have been able to bring back their furloughed staff. We’ve received numerous reports that keeping fully staffed has become the employment challenge operators are currently trying to solve.
The Operational Shift
To operate their restaurants, owners had to think quickly and shift to a very different model in some cases. Nearly a quarter of pizzerias were already operating a Delivery and Carryout Only (DELCO) model. For those restaurants, the shift was incorporating the safety and sanitary procedures set by the Center for Disease Control and state and local governments.
Others initiated new programs and services to either remain open or reopen. Nearly 62 percent of pizzerias went to a DELCO model. Curbside/contact-free pick-up became the go-to initiative. Before COVID-19, curbside was a rare service offered by a very small percentage of pizzerias. During the pandemic, 69 percent of pizzerias offered curbside. Over 43 percent also offered contactless delivery. More than a quarter of those surveyed took advantage of outdoor seating capacity.
Pizzeria owners also got creative and opened drive-thru operations as well as sectioning off parking spaces and parking lots for dining and carryout operations. Some even set up either food trucks outside of the restaurants to aid during peak rushes or sent food trucks into surrounding neighborhoods. To add revenue, pizzerias even added alcohol delivery and bodega/grocery offerings. Common grocery items included flour, yeast, produce, meats and even sanitizing supplies.
In order to meet state and local COVID-19 operational requirements, pizzerias instituted several new and/or enhanced measures, including outsourcing a cleaning company, using front of house dividers and shields, added disposable paper and packaging, PPE, enhanced cleaning supplies and others, like UV light, changing front of house floor plan, signs and distance markers.
The financial investment of instituting these measures to serve guests during the COVID-19 Pandemic has been significant. Though, 58 percent of pizzerias have been able to limit costs to less than $2,500. While 42 percent spent between $2,500 and $7,499, 10 percent spent over $7,500.
The Financial Blow
Though pizzeria have fared far better than the overall restaurant industry, 60 percent of pizzerias experienced a decrease in sales. But, 50 percent of those pizzerias that experienced sales growth were up by 16 percent or more over 2019 sales.
Though profit margins are typically higher in DELCO models, 63 percent of pizzerias experienced reduced profit margins. Labor costs and price of goods have increased since March. Thirty-seven percent of pizzerias increased profit margins by six percent or more.
Unfortunately, with the uncertainly of the COVID-19 pandemic, recovery may take several months to years. Pizzeria owners surveyed who experienced declining sales offer a varied view of how long it will take their businesses to recover from negative sales numbers during the pandemic. While only roughly 12 percent said they should recoup losses in less than six months, 23 percent think recovery will take six months to one year after the pandemic subsides. Another 22 percent project it will take over a year to recoup losses. While 17 percent say they may never fully recoup losses, another 26 percent say it is too early to predict how long recovery will take.
In response to COVID-19’s impact on businesses, the federal government established the $669-billion Paycheck Protection Program (PPP) as part of the Coronavirus Aid, Relief and Economic Security Act (CARES Act) on March 27. The Paycheck Protection Program is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll, according to the Small Business Administration (SBA). SBA will forgive loans if all employee retention criteria are met, and the funds are used for eligible expenses. Over 70 percent of pizzerias enrolled in PPP. Of those who received PPP loans, 32 percent said PPP was very critical and without it, the pizzerias would have shuttered. Another 35 percent found the PPP loans fairly critical and helped their business stay afloat. Only nine percent indicated that PPP was not very important to the stability of their restaurant.
Supply Chain Disruptions
While some were fortunate to not experience disruptions in the supply chain, 75 percent of operators said their business had some disruption in their supply chain. Eighty percent of operators surveyed reported that disruption(s) took two weeks or longer to fill. Meats were the hardest hit category and continue to have sporadic issues with availability. Over 75 percent of those surveyed experienced meat shortages. Cleaning supplies and PPE were also hard to acquire. Over 40 percent of operators found issues with cheese availability and many were forced to make cheese substitutions. There were also supply chain issues with pizza boxes, paper products, some produce, yeast, among other.
Many operators had to make drastic changes to their menus in order to provide guests quality products in a DELCO model. Roughly 47 percent of pizzeria operators altered their menu offerings due to the pandemic. Over 70 percent of those streamlined or decreased the number of menu items offered. Though pizza-making kits were a trending topic during the pandemic, only 14 percent of pizzerias offered make-at-home-pizza kits.
Leveraging Tech to Get Through the Pandemic
Technology has played a pivotal role for successful restaurant operations throughout the pandemic. For many operators, transitions to new technology, that typically take months to fully integrate, were being launched overnight.
By far, online ordering has been the most pivotal technology investment that pizzeria operators have made to be more effective during the pandemic at nearly 55 percent. While online ordering has steadily increased to be an industry standard, operators have invested in better execution, increased efficiency and tools to increase the ticket averages of online ordering.
A quarter of those surveyed invested in POS systems and phone systems.
We also saw QR codes make a comeback this year with 23 percent of respondents deploying the technology since March. Thought to be a trend that faded years ago, restaurants discovered QR codes’ full potential as a way to provide menus with zero contact. The camera on many of today’s smartphones can scroll over a QR code and send users directly to a hot link containing a restaurant’s menu.
Others used text marketing, as well as text ordering. Some operators even indicated they invested in tablet ordering, contactless credit card machines and e-commerce sites.
Big Picture: Operational and Capital Improvements
With dining rooms closed across most of the country and many pizzerias shifting to concentrated operating hours, over 50 percent of operators surveyed used the time to make improvements in their business.
Deep cleaning has been the most top-of-mind investment for pizzeria operators during the pandemic. We asked operators what kind of operational or capital improvements they’ve made since March. The answered were varied. The emphasis for many operators was enhancing dining and kitchen spaces, as well as building or upgrading outdoor seating. Many focused on maintenance and repairs.
Operators responded that they have painted their interiors, replaced flooring and seating. Others repaired furniture and updated the décor. Several completed full remodels of their dining area. Many changed the layout and flow of their front of house space. Some even expanded their footprint.
Equipment purchases made were focused on big kitchen items, as well as HVAC and air handling equipment. Some focused on the reconfiguring/building prep areas and rooms. View a complete list of improvements surveyed pizzerias made during the pandemic.
Pizzerias have proven their resiliency in the face of months of uncertainty. The most primary concern for operators right now is keeping their staff and customers safe and keeping their businesses open.