This is the first in a six-part series on the impact of the COVID-19 pandemic on the restaurant business five years later.
Remember January 2020? Remember hearing about the first rumblings of a type of pneumonia spreading in China, where a seafood market in Wuhan closed on the first day of the year? Over time it would be known as SARS-CoV-2, and then COVID-19. By February, six weeks after the first cases were reported, it had killed more than 1,000 people worldwide and had started to make its way into the U.S.
By March, it was ravaging Seattle. The actor Tom Hanks came down with it, and the NBA canceled its games, and suddenly everyone was talking about COVID. By St. Patrick’s Day, we were all told to stay at home unless we had no choice, stamping out a huge day for many restaurant and bar operators.
Americans stocked up on eggs and milk and toilet paper and quarantined themselves in their homes, gathering only outside. The term “social distancing” became commonplace. People couldn’t go to movies or concerts or sporting events. Offices shut down. Downtowns became ghost towns. Loved ones only met virtually on Zoom, which few people had heard of in February but by March had become the way people interacted.
Local and state governments told the restaurant industry to close its dining rooms. About 90,000 restaurants closed. Those that remained open relied on their takeout services, sometimes erecting makeshift curbside services with folding tables in parking lots. “It was like the music died and our communities were soulless,” said Lisa Miller, a consumer strategist and author of The Business of Joy. Everybody wondered whether there would even be a restaurant business when it was all over.
But the restaurant industry persisted. These days, it’s as big as it’s ever been, buoyed by some government help as well as a consumer who insisted on dining at restaurants as soon as they got a chance. In some respects, in fact, it’s difficult to tell if anything is different at all.
Except it is. The industry has evolved in ways both large and subtle, driven by a combination of changes to the consumer, how they prefer to use restaurants, where they live and how they consume media, along with a series of external pressures that tested operators’ mettle, sending a bunch of them into bankruptcy and rewriting investors’ valuation of the business.
It also created all kinds of new tension. There are frustrations over menu prices, and conflicts between what the industry has become over these five years, and what people think restaurants should be.
Aftershocks
The World Health Organization declared COVID-19 to be a pandemic on March 11, 2020. It officially ended on May 5, 2023, more than three years later. But the biggest impact on the restaurant industry was for a few months in the spring and summer of 2020 when restrictions on dine-in service were their tightest. Some restrictions would return with later COVID spikes, but the four months following March 2020 were the worst.
The restaurant industry generated $69 billion in sales in February 2020, according to federal data. By April it was down to $31 billion, a 54% decline. And 48% of the nearly 13 million restaurant employees were out of a job. Independents were hurt the most.
Sales recovered more quickly than many people imagined they would, however. By May 2021, industry sales topped pre-pandemic sales numbers on a pure dollar standpoint for the first time. These days, Americans spend more on food at restaurants, both in dollar numbers and as a percentage of their food spending, than they ever have.
In 2019, consumers spent 50% of their food dollar at restaurants. By last year it was 53%.
It’s not just restaurant pricing. Restaurant prices are up 30% since January 2020, according to federal data. But that is just 210 basis points more than grocery inflation over the same period. Even if we factor that out, consumers are still spending more of their food dollar at restaurants right now.
Yet in determining how the industry has changed over these past five years, it’s worth viewing the pandemic for what it was on the business: An earthquake, followed by a series of aftershocks.
As dine-in service returned, a false recovery of sorts emerged as sales took off at many chains. But people didn’t return to work as quickly, leading to a global labor shortage that drove up the cost of labor and also food costs. That hurt profit margins. But it also led the Federal Reserve to increase interest rates, which damaged industry valuations.
Aggressive menu price increases to offset higher labor costs—which would continue to increase long after food cost inflation subsided—would ultimately frustrate consumers. By the end of 2023 traffic declines would become commonplace. Those declines have continued into early 2025.
The industry adapts
All that has had an impact on the way operators do business. Supply chain challenges, for instance, forced operators to think more intently about the sources of their products. And it’s not uncommon these days to see c-level supply chain executives. “Restaurant operators learned to be much more nimble with their supply chain,” said James Walker, CEO of the online ordering company Lunchbox.
Operators pushing to get more workers into their restaurants increased pay and benefits, especially for general managers. That’s worked to lower turnover below 2019 levels. Manager turnover has remained high, however.
“It changed the mindset for a lot of people,” said Victor Fernandez, chief insights officer for Black Box Intelligence. “Other things became more important. Work-life balance, what you’re doing with your life and who you spend your time with. There’s a lot more options. Money is a factor. But others offer more flexibility.”
The industry also added more technology. It remains behind a lot of other industries in terms of in-store technology, but restaurants are catching up. Automation of more processes has become more common. AI software can do scheduling, manage inventory and take orders in the drive-thru.
Mobile ordering has become particularly popular. More than 30% of transactions at Starbucks, for instance, now come through the chain’s mobile channels. Wingstop gets 70% of its sales through digital channels. Most major chains have driven substantial growth in recent years through their mobile app.
All that has made the industry more efficient. In January 2020, restaurants generated just over $5,000 in revenue per employee that month. This January it was just under $7,400—a difference of 46%. Adjusted for price increases, restaurants are 16% more efficient than they were five years ago.
Some of that efficiency can be attributed to this: Takeout is a lot more popular. According to the National Restaurant Association, 73% of traffic in January of this year was for consumption outside the restaurant. In 2019 that was 65%.
Dining alone
That hasn’t been the boon to limited-service restaurants that you might think it is. In December of last year, limited-service restaurants generated 48% of total restaurant sales. That’s about the same level as in February 2020.
Instead, more types of restaurants are catering to the off-premises consumer. Half of operators—no matter the service style—told the National Restaurant Association that they are getting more orders for takeout and delivery than they did five years ago.
A lot of that is due to delivery. Transactions for delivery have more than doubled over the past five years, from 4% in 2019 to 9% last year. That means full-service independent restaurants that had been built for dine-in service are now gathering orders for third-party delivery.
But it’s not just delivery. Drive-thru now represents 35% of sales, up two percentage points compared with five years ago. Drive-thru sites are the most in-demand real estate in the restaurant industry. Five years ago, drive-thru-only concepts were almost unheard of, outside of struggling Checkers and Rally’s and a few innovative coffee concepts in the Pacific Northwest.
Today, some of the industry’s fastest-growing chains are drive-thru-only, including Dutch Bros and 7 Brew. Many existing chains are testing drive-thru-only locations, such as Jack in the Box and even McDonald’s.
“Everybody recognizes that off-premise is a big part of the business and will forever be a big part of the business, and we’ve got to embrace it,” Fernandez said.
What people do with the food when they get it is also changed. Thirty-two percent of customers dine by themselves, up from 26% in 2019, according to Technomic. And people aren’t even going home. “Car consumption has skyrocketed and not let up since the pandemic,” said Robert Byrne, senior director of consumer research for Technomic. “We talk about the road trip daypart. It’s now less about, ‘get your food and go park somewhere and eat it.’ It’s more about people just enjoy eating in their car.”
Working from home
Downtown Minneapolis has an often-confusing network of skyways between office buildings, which were built so people wouldn’t have to go outside during the frigid winter months. Those offices traditionally empty at lunchtime, filling the skyways with hungry office workers, which supplied a generation of restaurants lining those skyways with plenty of business.
These days, those skyways don’t get so crowded, particularly on Fridays. And the number of restaurants has diminished.
The pandemic permanently increased the percentage of people who spend at least some time working from home. Before the pandemic, less than 6% of people worked from home, according to the U.S. Census.
These days, 13% of employees work from home full time, according to the data firm WFH Research. Nearly 26% of workers have some hybrid arrangement where they work from home part of the week. That has changed the equation for a large group of restaurants that were geared in part to serve those areas.
Consider the flurry of restaurant chain bankruptcies in 2024. Just about every one of the restaurant chains that filed for bankruptcy in 2024, and so far in 2025, has mentioned the pandemic as a major cause.
Yet most of the bankruptcy filings were of fast-casual brands, such as the Mediterranean chain Roti and Mexican chains Rubio’s and Tijuana Flats, that had targeted more urban areas. Those sales faltered as more people worked from home, draining lunch business, and as Americans left urban markets altogether.
That said, the full-service sector has clearly struggled. Among Top 500 chains, fast-casual chains now generate more sales than do full-service concepts, despite those smaller chains’ challenges. Full-service chains haven’t regained traffic lost during the pandemic.
“Traffic continues to go down on a same-store basis,” Fernandez said “So maybe your dollars are up, but the people you’re serving through your restaurant is down compared to where it was five years ago.”
So, while more fast-casual chains filed for bankruptcy, the biggest bankruptcies have been among full-service brands, including Red Lobster and TGI Fridays, two onetime mainstays of the casual-dining sector. Hooters, another one, is teetering perilously close to that same fate.
To be sure, difficult operating environments, like the one the industry has been in off and on for five years, tend to expose weak financials. And a lot of restaurant chains going into the pandemic operated with a lot of debt, too many expensive leases, or some combination of both.
The full-service chains ended up in bankruptcy largely because of excessive debt and management missteps, such as Red Lobster’s infamous all-you-can-eat shrimp deal in 2023, done at least in part to regain lost traffic. Many of the fast-casual chains that ran into trouble did so because they signed expensive leases before the pandemic, betting on a business that disappeared after 2020.
What is a restaurant anyway?
The pandemic has had other, more subtle impacts on the industry, in some cases involving entire sectors.
Third-party delivery, for instance, emerged in 2017 as an option. It grew rapidly. But then the pandemic put that business into overdrive, fueling the growth of DoorDash and Uber Eats. Consumers today have more choices for delivered food than they ever have, and they’ve continued to use the service, despite its expense, because the convenience is worth it to them.
That has had a major impact on pizza chains, which flourished in 2020 and 2021 but have slowed down since then. Consumers today can get anything delivered. But they also clearly prefer ordering through the delivery apps, so an increasing percentage of the sales these chains do get is coming through aggregators.
Papa Johns, the first major pizza delivery chain to use aggregators before the pandemic, now gets 17% of its business through those apps. Only 35% of its sales come through the chain’s own delivery channels. Rival Pizza Hut, meanwhile, just opened a test concept with a preprepared menu and a drive-thru, suggesting the chain may believe its future is as a traditional fast-food chain.
It’s not just pizza, however. There is a certain tension between what chains have become, and what we believe they should be.
To get a sense of how this looks on a large scale, look no further than Starbucks. In early November of 2023, the chain was hitting on all cylinders. Nearly a third of its business was ordered on its mobile app. Sixty percent of its sales came from members of its Starbucks Rewards loyalty program.
The chain’s customers were eagerly customizing drinks, making add-ins such as mocha sauce and cold foam into a $1 billion a year business. There were some concerns about operations, but the company had a plan to fix it.
And then the bottom fell out, largely fueled by a social media boycott that evolved into a year-long dose of questions about the conflict between Starbucks’ historic role as “third place” coffee shop and its current status as a digitally enabled beverage manufacturing business. By late summer of last year, its traffic was down 10% and the company’s management was overhauled, with Chipotle’s Brian Niccol named CEO.
Niccol has since worked to steer the chain back to its coffee shop roots, bringing back handwritten names on cups, adding comfortable chairs in the shops and letting customers add their own creamer in coffees again.
Customers may be gravitating toward takeout and delivery. But that doesn’t mean they don’t want an experience. Consider that, as Starbucks struggled last year, the drive-thru-focused Dutch Bros—which has established a service-oriented business strategy—had the best year since it went public in 2021. Restaurants are gathering places, and people still want a connection.
“The data shows that people are craving so much connectivity,” Miller said. “I think we’re doing ourselves a disservice to say, well, we don’t need bigger restaurants because we can’t get people in. So therefore let’s make a smaller restaurant. Then you make a smaller restaurant and then the experience goes. It continues to shrink.
“We’re not answering the right problem. The right answer is why aren’t people coming? And it’s because they don’t have the experience they want.”
Consumers today still want to dine out. Data from both Miller and the National Restaurant Association say that people aren’t eating out as much as they want. There’s “pent-up demand” to be had. Full-service chains like Chili’s and Texas Roadhouse have tapped into consumers’ desire for good service, generating strong sales last year. Independent restaurants have largely recovered.
So, while the restaurant industry has changed, one thing has not. “Consumers love restaurants,” Byrne said. “They loved them all through the pandemic. You know, for all the challenges and difficulties that restaurants faced, they really were one bright spot for consumers that entire time.”
Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.