Starbucks, Dunkin' Donuts, Panera Bread seeing strong COVID-19 recovery: RPT

Ethan Chernofsky, CMO, joins Yahoo Finance to discuss what foot traffic says about the state of the recovery.

Video transcript

KRISTIN MYERS: Welcome back. Well, as the economy continues to recover, foot traffic to places like Starbucks and Dunkin' Donuts is on the rise. So what does this say about the state of the economic recovery? Well, we're joined now by Ethan Chernofsky, chief marketing officer at, and Yahoo Finance's Brooke DiPalma. Thank you both for joining us for this conversation. So Ethan, just based on the foot traffic data that you guys have been seeing, how optimistic are you about the recovery at this stage?

ETHAN CHERNOFSKY: I think, at this stage, there's just ample reason for lots of optimism for a few reasons. First, we're seeing visitors come back at a really strong level across the country. But even more, that's happening while California and New York are still trailing far behind because of the pace of their reopenings. So when you think of how many retail locations for brands like Starbucks and other retailers that we have in those states, there's actually room for another surge to come in June, July ahead of a really critical back-to-school season.

BROOKE DIPALMA: And Ethan, over this past year, many large fast food giants like McDonald's, like Burger King have really put their best foot forward and invested in digital. So as people return to those indoor dining rooms, how will digital play a role in that?

ETHAN CHERNOFSKY: So I think it's about omnichannel. And I know this is kind of the buzzword of the space for a long time now, but we got this great opportunity for brands to really focus on, how can they meet the customer where they want to be met? And this means having, you know, really strong delivery, drive-through, takeaway options, but it also means having a really strong presence in the location. When we think about the rise of work from home and what that could mean for people who want to get out of the house for an hour or two in the middle of the day and how that Starbucks can become a great extra workspace, the in-store growth of the omnichannel piece is just as important as the digital side.

BROOKE DIPALMA: And the elephant in the room right now with the fast food industry is really supply chain issues that are becoming apparent during this time as people migrated during the pandemic and these local Starbucks, Dunkin' restaurants just can't keep up. So where exactly are you seeing that happen, and what's your recommendation for fast food to really keep up with that migration trend?

ETHAN CHERNOFSKY: I think the starting point is recognizing that the fact that there's a supply chain issue, which we knew was going to be somewhat of a problem because of the global nature of this pandemic-- but the reality is, there's a recovery happening, and demand has proved to be incredibly resilient when that wasn't necessarily what many expected in the height of the pandemic. So the first step is to realize, wow, things in a really good position. The second is there's been a lot of change because of the pandemic-- like you mentioned, migration patterns, people leaving major cities and going into, you know, other cities like Raleigh, North Carolina or Austin, Texas or Phoenix, Arizona and the fact that that's going to shift demand to other locations. So there's going to be a lot of work done by these brands to understand how their audiences have shifted and how they need to adapt their footprint to adapt-- to reach a changed ecosystem.

ALEXIS CHRISTOFOROUS: You know, Ethan, going back to your survey, what were some of the themes that you saw or the patterns that you saw that-- when it came to foot traffic sort of rebounding from where it was at the height of the pandemic?

ETHAN CHERNOFSKY: So the interesting thing is, throughout the pandemic, we saw some sectors that were just doing better than others. And so grocery and home improvement, these were strong performers that benefited from essential retail status and benefited from a really strong alignment with key retail trends. But other sectors, there was a much more downcast approach.

So a brand like Panera or other sit-down restaurants or even an in-store focus for a brand like Starbucks, there wasn't necessarily this expectation of strong return, yet that's exactly what we're seeing. And it's part of two key elements. One, we're seeing a really strong proof that consumer demand has been tremendously resilient but also that routines have returned. And that has guided a lot of the decision-making that we make on a day-to-day basis. And as that continues to take place, expect "normalcy," quote unquote, to return.

KRISTIN MYERS: So Ethan, curious to know how you think this is going to impact the need for labor moving forward. I think we've all seen-- and just anecdotally, if you just try to get an Uber or a Lyft lately, it's like, good luck. There's no drivers available out there. So as we see more and more people frequenting these businesses, how are they faring in terms of having the right amount of employees to be able to match some of that demand?

ETHAN CHERNOFSKY: I mean, you nailed it on the head. I think as we talk about how important that in-store, in-restaurant experience is, it puts an added emphasis on how important the staff and employees are within every location. And that doesn't matter whether it's a Starbucks or a Macy's or anything in between. And so that labor piece of the puzzle is going to be really significant, and I think it's going to depend on regions.

So in cities, we are seeing this rise of a younger, slightly less affluent base coming in to live in major cities. We're seeing a shift in the suburbs. And so I think a lot of the strategic decisions that are going to have to be made, whether it's supply chain or whether it's staffing, are going to fall on the shoulders of these brands to ensure that that in-store location, that in-store experience is ready to meet this demand that's coming its way.

BROOKE DIPALMA: And speaking of that experience, Starbucks, as you noted in the report, has really always been an experiential place. And prior to the pandemic, we saw fireplaces in fast food restaurants like Wendy's. Moving forward, how do you think fast food restaurants are really rethinking how they're portraying their consumer experience?

ETHAN CHERNOFSKY: So I think it's all about understanding where your audience is in each specific location. So if I have, you know, a Starbucks location in Midtown Manhattan that is catering primarily to people before or after work or stopping in for a quick bite in the middle of the day, then I want it to be convenience oriented and it should be all about how I make that trip as seamless, as short, as painless as possible. But if I have a location in the suburbs, I want to make sure that there's space, that there's a place for people to sit down, open up their laptop, work for a little while because that's the opportunity that work from home provides. And for a brand like Starbucks or Dunkin' or Panera or many others, that's a customer that's going to be sitting there for a longer period of time, increasing the likelihood of a higher transaction size-- you know, several coffees, more food-- and a more valuable customer at an off-peak period that could provide a really strong benefit to brands like these.

KRISTIN MYERS: Based on how things are going right now, if you had to estimate or take out your crystal ball, when do you think exactly we're actually going to hit back to normal, so to speak, or perhaps even exceed some of those pre-pandemic levels, especially as folks are, you know, just absolutely dying to get back outside and to hang out with friends and to walk into a store and see a face instead of ordering everything online?

ETHAN CHERNOFSKY: It's so hard to predict and to speculate. I think the big opportunity for us to really see where we stand, in terms of the wider food and beverage and retail landscape, is going to be the back-to-school season, so late July, August. If we're seeing numbers that are in line with 2019 levels or even surpassing them, that's when we're going to have a lot of confidence that the recovery has really found its footing and we're looking back towards growth and improvements. I think that could be coming our way. All signs indicate that we're moving in a really positive direction. But in a year as crazy as the last one has been, it's very difficult to predict.

KRISTIN MYERS: All right, Ethan Chernofsky, chief marketing officer for, Yahoo Finance's Brooke DiPalma, thank you both for joining us today.