The coronavirus pandemic is ravaging the restaurant industry at every level, with many successful chains temporarily closing their doors, furloughing employees or enacting mass layoffs across the country. But Chipotle Mexican Grill is an exception to the rule. Its CFO is expressing confidence in the company's long-term viability despite the drop in foot traffic.
"We can get through for many months, or even a year, at these kinds of depressed sales levels," CFO Jack Hartung told Bloomberg Wednesday, although he declined to provide sales figures.
- Chipotle, which has made takeout and delivery part of its fast-casual business model, is pulling ahead of sit-down restaurants such as Cheesecake Factory, whose CEO announced last week it would not be able to pay its April rent.
Many restaurants are pivoting to a business model prioritizing takeout and delivery, as sales from sit-down customers plummet amid state-by-state stay-home and shelter-in-place mandates.
U.S. restaurant profits could decline as much as 20% over the next 12 months, Moody's says. The National Restaurant Association says sales could fall as much as $225 billion, with more than 40 states ordering restaurant closures to prevent spreading.
Chipotle is not immune to the impacts. It has closed its European locations and furloughed a small percentage of its staff, Hartung said. "Everybody is losing a meaningful part of the business," he told Bloomberg.
Even so, 97% of Chipotle’s 2,600 locations remain open, at least in some capacity. It's a different story for other chains, though. The Cheesecake Factory, one of America’s well-known sit-down restaurant chains, will not be able to make rent payments for any of its storefronts this month, company Chairman and CEO David Overton said in a letter to owners of the properties his restaurants lease. The virus, he said, "has decreased cash flow and inflicted a tremendous financial blow" to the business. The letter was reported by Eater.
Matthew Clark, Cheesecake Factory CFO, told CNN Business that the company has "very strong, longstanding relationships" with its landlords, and is certain that "with their partnership, we will be able to work together to weather this storm in the appropriate manner."
Cheesecake Factory is not alone in its coronavirus struggles. Last week, investors at Moody's downgraded the ratings of sit-down restaurants chains including Red Lobster, P.F. Chang’s, California Pizza Kitchen and Checker’s Drive-In, Restaurant Business reported.
Chipotle, which had $880.8 million in cash and short-term investments at the end of 2019, will be saving money by "delaying new store development, halting executive travel and reconsidering the hire of project consultants," Bloomberg said.
And even though Hartung is much more confident than Overton, Chipotle, like Cheesecake Factory, will seek rent deferrals for some of its locations. "We don’t really need freebies, we just need deferrals," Hartung said. "We’d like some relief for a matter of a few months."