Operators ‘Wait and See’ as Hurricane Florence Makes Landfall
Hurricane Florence is just hitting the coast of North and South Carolina, and restaurant operators are preparing for a rough week.
Currently, Florence is almost twice the size of Harvey, which hit the Gulf Coast in 2017, and 100 miles wider than even Hurricane Katrina, which devastated the Gulf Coast and especially New Orleans in 2005. If forecasts prove right, the storm may look a lot like Harvey in terms of damage. While it’s luckily slowed somewhat to a Category 2, the storm is expected to hover over the eastern seaboard, drenching the Carolinas, then northwestern Georgia and later Virginia. Harvey’s rainfall was catastrophic for cities such as Galveston, Texas.
Operators there were swamped. Shoukat Dhanani, CEO of Houston Foods, a large QSR operator in the area, said one of his locations had to be rebuilt completely before he could return to operating.
“It’s still got like 5 feet of water in the restaurant,” said Dhanani a week after the storm. “It will be closed for at least three months. Not only going to have to fix all the building damage, but have to get brand new equipment package. So it’ll be more like building a new restaurant.”
Obviously, Harvey had a significant impact on restaurant sales amid the storm.
“Same-store sales in Texas declined 15 percent that last week, almost 13 percentage points below the average of the first three weeks of the month,” said Victor Hernandez executive director of insights and knowledge at data firm TDn2K.
For August 2017, Harvey led to a 5.2 percent same-store sales decline and a 7 percent drop in traffic.
But so far, analysts don’t think it will be disastrous on the Eastern seaboard. David Tarantino of Baird projected three days without sales for restaurants in the affected area. The most direly affected would be Zoe’s Kitchen, which has about 19 percent of domestic restaurants in the region, Chuy’s has about 12 percent and Domino’s has about 10 percent of its restaurants in the area. Tarantino projected a sales impact of 0.7 percent, 0.4 percent and 0.4 percent, respectively.
Andy Barish at investment banking firm Jefferies said there may be some outsized fear for restaurants in the region. He said that casual dining would be hit hardest. But Ruth’s Hospitality Group, Noodles and Chipotle have 8 percent or more of their operations in the region. And Andrew Strelzik, of BMO Capital markets, wrote that as many as 50 Chili’s could be affected by the storm.
Not accounted in either report, however, have been the intense preparations around Hurricane Florence. There are evacuations up and down the coast and the size of the storm has some operators being extra cautious. In Wilmington, North Carolina, TCBY franchise operator Sam Batt said he closed his locations early to give employees time to get out.
“Safety, that’s our biggest concern. In Wilmington, they had mandatory evacuations so we closed eight of our stores Monday night to allow our employees to get off the coast where it’s going to hit,” said Batt.
He said he would “wait and see” how things panned out in Charlotte, North Carolina, where the bulk of his locations are. Many other restaurateurs on the coast did the same, closing much earlier than operators in other hurricanes.
There may be a bright spot, even if flooding is as bad as forecasters say. According to restaurant analyst Bonnie Riggs, quick service restaurants actually see a bump in sales after a damaging storm as people return home to no power and have to eat out for many of their meals. Construction workers rebuilding also contribute to sales bumps, eating out for the majority of their meals after a big storm.
Whatever happens, we hope everyone stays safe out on the East Coast this week.