U.S. restaurants turn to grocery sales to help offset losses

Charlene Gulliford at the Gandy Dancer never figured there would come a day when the Michigan restaurant known for its steaks and seafood would sell toilet paper and cartons of eggs, but the coronavirus has restaurants in survival mode.

The popular restaurant in Ann Arbor now doubles as a grocery store, offering staples such milk and bread in addition to meats and fish from its own pantry—and yes, even paper towels and the ever-elusive toilet paper. Sales began two weeks ago and the Gandy Dancer has found an income source to make up for some of its lost dine-in business, while also filling a need since traditional grocers are struggling to keep up with demand.

“A lot of people are saying they’re happy to support us, but a lot of people are saying, ‘Thank you for helping us,’” said Gulliford, the restaurant’s general manager.

The idea is catching on nationwide. Stay-at-home and social distancing orders meant to slow the spread of COVID-19 have put restaurant dining on hold, forcing many to close and leaving others barely surviving. From large chains to mom-and-pop eateries, restaurants are increasingly turning to grocery sales.

Panera this week launched Panera Grocery, offering not only the St. Louis-based chain’s popular breads, bagels and sweets but items such as milk, eggs and fresh produce that its 2,100 U.S. stores normally use to make meals. Grocery items can be delivered or picked up.

Louisville-based steakhouse chain Texas Roadhouse began selling ready-to-grill steaks and pork chops directly to customers late last month.

Subway is selling groceries at 250 of its stores in five states—California, Connecticut, Oregon, Tennessee and Washington. Potbelly Sandwich Shop franchises launched Potbelly Pantry, offering mostly foods that the chain uses to make its sandwiches, such as meats, cheeses and breads.

Panera’s vice president of wellness and food policy, Sara Burnett, said the decision to sell groceries is a reaction to “the unprecedented crisis our country’s going through right now.” She wouldn’t disclose how much the pandemic has cost Panera, but she said 30 percent of its business typically comes from in-restaurant dining, “and that obviously is completely gone.”

The National Restaurant Association says the industry has lost 3 million jobs and $25 billion in sales since March 1. Spokeswoman Vanessa Sink said 3% of restaurants have closed permanently and another 11% expect to do so by the end of the month.

The move to grocery sales has been swift. Panera would typically spend months on a new business proposal, doing research, conducting surveys and opening test markets. Not this time. Panera Grocery went from an idea to launch in two weeks, Burnett said.

Grocery items sold by restaurants vary greatly. Some offer mostly the types of things already in their pantries, such as meats, vegetables, fruit, cheese, milk and eggs. Others, like the Gandy Dancer, offer a much broader selection.

Union Loafers in St. Louis is opting for quality, even if it means a higher price. The restaurant began selling locally produced goods such as eggs, milk, jams and meats on March 31. Co-owner Sean Netzer said patrons don’t mind the higher price—most items are selling out daily.

The chain restaurants, which buy in extraordinary bulk, can afford to sell at a lower cost. Subway and Panera Grocery prices are comparable to grocery store prices, the companies said.

Gulliford said the Gandy Dancer’s prices are more than competitive and can even be cheaper than the grocery store’s. For example, six lemons sell for $1 and potatoes are $1 per pound, she said.

Many of the restaurants-turned-grocery stores are offering “contact-free” service in which the customer place orders by phone or online and the goods are delivered straight to the trunk or backseat of the car. Gulliford said the elderly, who are at a higher risk of serious illness or death from the coronavirus, are especially appreciative of being able to avoid going into stores.

Restaurant operators aren’t sure if grocery sales will continue once the pandemic passes. Panera sees this as “kind of a tipping point to see what our customers need,” Burnett said.

Gulliford said the future is especially difficult to predict during this unprecedented time.

“It just really depends on what the new normal is,” she said.