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Takeout and dining out has never been so popular – how U.S. restaurants survived and now thrive

It’s been a crazy year and a half for the restaurant business, but many of the companies that survived are starting to thrive.

Take Darden Restaurants
DRI,
-1.58%
,
owner of the popular chains Olive Garden and Longhorn Steakhouse.

Sales at Darden sank 43% to $1.27 billion in the three months that ran from March to May 2020, when the pandemic shut down much of the U.S. economy. Fast forward one year later and quarterly sales have bounced back strongly to $2.28 billion.

“Olive Garden broke its all-time single day sales record on Mother’s Day,” Chief Operating Office Rick Cardenas told Wall Street analysts on a conference call to discuss the company’s most recent financial results.

Darden stock has experienced a similarly harrowing whipsaw. Shares nosedived to $39 from $121 in the first month of the pandemic, but it recently touched an all-time high of $145.

The scene is playing out across the country.

Sales at U.S. restaurants have soared this year after Americans got vaccinated, governments relaxed restrictions, and people went out to eat again. The restaurant-reservation site OpenTable shows that reservations have returned to normal after plunging by two-thirds during the pandemic.

Restaurant receipts topped $70 billion in June for the first time ever. They were also 6.5% higher compared to the last month before the onset of the coronavirus pandemic, government statistics show.

Read: Bars and restaurants ring up big business and lead rebound in retail sales

“Households are getting out and enjoying themselves after being cooped up for over a year,” said chief economist Stephen Stanley of Amherst Pierpont Securities.

Mother of invention

Badly battered by the pandemic early on, Darden and other restaurants quickly adapted in an effort to survive. They spent more on technology to make it easier to order food online, for instance, and gave customers more delivery options such as contactless curbside pickup.

Even high-end restaurants that shunned takeout orders or small mom-and-pop operations with no internet presence got into the act.

Although tens of thousands of restaurants failed or closed their doors, most scraped by to set the stage for this year’s comeback.

The restaurant revival has gathered momentum even though many eateries are struggling to cope with lingering side-effects from the pandemic such as a labor shortage and higher prices for supplies.

Before the pandemic 11.1 million people worked at restaurants, making the industry one of the biggest employers in the U.S. Yet the viral outbreak put more than 5 million cooks, waiters, waitresses and other restaurant workers out of a job.

The industry has rehired most of those people, but employment is still down by 1.1 million compared to the last days before the pandemic. That’s a large 10% chunk of the pre-Covid workforce.

The labor shortage is so severe many restaurants have boosted pay or offered other incentives to lure people back to work — a problem compounded, owners say, by extra federal unemployment benefits. The benefits have induced some unemployed Americans to stay out of the workforce, studies show.

In some cases, bars and restaurants simply don’t have enough people to provide all the food and drinks that customers want.

“Due to an inability to fully staff, some restaurants and retailers reduced hours,” the Federal Reserve found in its most recent review of the economy.

A lack of labor and rising labor costs aren’t the only problems. The cost of supplies are also going up.

Read: Prices are soaring and Americans aren’t happy about it

Also: The cost of living posts biggest surge since 2008 as inflation spreads

Food and other producers can’t keep pace with the explosion in sales spawned by all the pentup demand, a problem exacerbated by ongoing disruptions in global supply chains.

Restaurants have responded by simplifying menus, dropping expensive items such as crabcakes or even raising prices.

In the long run, though, all the changes in the industry wrought by the pandemic are likely to prove the saving grace. Restaurants are using technology to keep costs down, cope with the shortage of labor and limit price increases for customers.

Widespread automation, for example, is here to stay and is expected to accelerate. Restaurants are deploying iPads to tables or setting up self-serve kiosks, for instance, so customers can order themselves. They are also using technology to prepare the food and even deliver it.

“Doing more with less will make it sustainable for businesses to pay higher wages and stay profitable,” economists at PNC Financial Services said.

The prospects for the industry are looking so much brighter that thousands of new restaurants are popping up.

More than 22,000 restaurants or food-related businesses reopened in the second quarter and about 20,000 new restaurants opened their doors for the very first time, new research from online review site Yelp shows.

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