Restaurants Get a Long-Awaited Boost as Stimulus Payments Flow

(Bloomberg) -- The beleaguered restaurant industry is experiencing a boost as $600 stimulus checks make their way into American households.

Restaurant sales were at their strongest since the start of the pandemic during the Jan. 4 to 17 period, according to the Facteus U.S. Consumer Spend Index, which tracks credit- and debit-card spending. TGI Friday’s, Dave and Buster’s Entertainment Inc. and Hooters of America have cited the stimulus when discussing higher demand.

“People are getting real money in their pockets and getting back out,” Hooters Chief Executive Officer Sal Melilli said. “I’m hoping we have a bridge here, that the stimulus helps get us to the mass vaccinations.”

He added that same-store sales -- an important gauge of performance for restaurants -- have inched up in January and customers are spending more on orders and ordering more frequently.

Economic aid will be crucial for sustaining restaurants, especially for sit-down eateries that have been decimated by the pandemic and social-distancing measures. The industry has said the aid will help keep many businesses afloat until vaccinations become more widely available. In the U.S., vaccinations began on Dec. 14 for health-care workers, and 17.2 million shots have been given -- about 5% of the population.

‘Noticeable Uptick’

Despite the slow pace, spending at restaurants saw a clear increase in the new year, jumping 16% for the week ended Jan. 11 after being negative for all of December, according to Facteus data. There was also a “noticeable uptick” in spending across food delivery providers, including Grubhub Inc. and Postmates Inc., Facteus said in a statement.

Casual-dining restaurants, whose sales have been hardest hit, are benefiting because “they tend to be a little bit more discretionary,” said Credit Suisse Securities analyst Lauren Silberman.

“If I have extra income, that might be the first place I go,” Silberman said. The boost could be sustained if trends follow those observed after the first round of stimulus last April, she said. Getting customers “back into a routine helped drive some of that and keep it at the same level.”

More stimulus could be on the way as President Joe Biden has proposed $1.9 trillion of relief that would include higher direct payments to consumers.

Michael Halen, an analyst with Bloomberg Intelligence, said the stimulus “helped pretty significantly” in April and predicted improvements in the coming months.

“December was pretty terrible -- we think January should be a pretty decent improvement and February should improve over January, but we’ll see,” Halen said. “Hopefully we’ll see some of those governors start to reopen economies.”

Fast food, which has gained market share during the pandemic thanks to its socially distant drive thrus and carryout, is also benefiting from the stimulus. Even with three-quarters of its dining rooms closed, Church’s Chicken, which has 1,500 locations in 25 countries, has seen double-digit same-store sales growth at its U.S. franchised restaurants so far in January. Part of that is likely the government aid, CEO Joe Christina said in an interview.

“You’ve got to feel for folks that are hurting out there. I believe in stimulus checks,” he said. “I believe in helping those that are struggling because of the pandemic. It helps our business.”