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Coronavirus May Speed Demise of Restaurant Dining Rooms

Restaurants are struggling to provide options for their customers in order to provide social distancing. Will this trend continue long after the crisis is over?

Photo Courtesy of CoStar News.

The global spread of the coronavirus could speed the disruption of restaurant real estate as consumers avoid crowded dining rooms.

That may mean more use of app-enabled food delivery, "ghost kitchens," tech-enhanced drive-thrus and properties designed to speed meals ordered in advance.

It’s too soon to predict how most companies’ long-term site selection and other real estate planning will be affected.

Restaurants with space dedicated to pickup and delivery may be able to quickly pivot to serve customers avoiding dining rooms.

Digital orders as of late 2019 were growing at an annual rate of 20%, compared with near-zero growth for overall sales during the past year.

To support the growing delivery ecosystem, the major delivery providers, such as Grubhub, Uber Eats, and DoorDash will need to show they can consistently operate at a profit while scaling their operations, which generally hasn’t happened yet.

Photo Courtesy of CoStar News.

There’s another problem drawing increasing complaints that the industry will need to address: delivery drivers snacking on food that’s on its way to paying customers.

While big national chains can afford the fees charged by delivery services, smaller operators are harder-pressed to eat those costs or avoid passing them on to their customers.

Long before the coronavirus’ emergence, time-strapped consumers were already shunning dining rooms: 70% or more of sales now coming from drive-thru and takeout orders at major fast food chains.

The push toward convenience ordering has also prompted a rising number of full-service restaurants to set up "ghost restaurants" where you can’t stop by for a sit-down meal.

Restaurant development consultant Jerry Prendergast said he’s not yet seeing evidence of projects being spurred specifically by the coronavirus, but the situation is likely to help fuel what’s already been a steady rise in "ghost" operations.

The latest twist is the clustering of several production kitchens under one roof. The kitchens are sometimes owned by one company looking to produce multiple types of cuisine, and sometimes by different companies looking to share space and operational costs.

Ghost kitchens are catching the attention of various prominent U.S. developers and investors who see this as a budding new real estate category with room for growth.

2020 CoStar News.

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