By Nina Trentmann and Mark Maurer 

Fast-food restaurants are responding to changing consumer tastes during the coronavirus pandemic in ways that have boosted profits at some chains to where they were before the health crisis or even higher.

Some restaurants are focusing on expanding their takeout and drive-through businesses, while others are betting on delivery services amid a recent surge in new infections and changing regulations in the U.S. And many expect these efforts to pay off longer term as the pandemic shows no signs of fading and some consumer habits could change permanently.

Many fast-food chains brought down staffing levels and cleaning costs by closing their dining rooms, and aren't in a rush to reopen them. "For quick-service restaurants, they don't want to reopen their dining rooms because this drags down profitability and increases costs," said Andrew Charles, an analyst at investment bank Cowen Inc.

Restaurant Brands International Inc., the owner of the Burger King, Tim Hortons and Popeyes Louisiana Kitchen brands, doubled down on an existing effort to boost its digital offering and delivery services.

"Covid acted as an accelerator for some of the trends that we already identified in our strategy," said Matthew Dunnigan, chief financial officer of RBI.

The Canadian-U.S. fast-food chain relied on its digital sales channels when the pandemic hit, Mr. Dunnigan said. RBI extended curbside pickup, drive-through and delivery services, he said.

The company now has nearly 10,000 outlets offering delivery in the U.S. and Canada, compared with a few hundred in the beginning of 2018. RBI added more than 2,000 stores to its delivery network in the first months of the pandemic and ramped up investments in its mobile apps, Mr. Dunnigan said. He declined to provide a figure for those initiatives, but said RBI's investment in its digital sales channels in recent years has been substantial.

Church's Chicken, an Atlanta-based fast-food operator specializing in fried chicken, doubled down on drive-throughs, which had been a focus since 2017, finance chief Louis "Dusty" Profumo said. "We have been working on this for years, and it paid off. It really benefited our business," he said, pointing to a 15% to 20% increase in drive-through sales since March, with those sales now accounting for nearly all of Church's business.

Church's is looking to reduce the size of some of its restaurants, Mr. Profumo said. "Customers want their meals wherever, whenever," he said. "It is efficient to run all of your business through drive-through." Most dining rooms are closed for now, according to Mr. Profumo.

Church's Chicken is rolling out new delivery and payment systems to restaurants operated by franchisees, which account for the majority of outlets, Mr. Profumo said.

Panda Express in June added its own delivery service, said David Landsberg, finance chief of parent company Panda Restaurant Group Inc. "We've made a bigger commitment to delivery since the pandemic started," Mr. Landsberg said.

Panda has invested $40 million since the beginning of the pandemic in improving health and safety measures and its delivery platform. The company is looking to hire 30,000 new employees this year, despite recently pausing the reopening of lobbies for customers to carry out their orders.

Panda's dining rooms remain closed, even though management would like to reopen them. "It's about when the social-distancing guidelines go away, and at this point, that's unlikely to happen until sometime during 2021," Mr. Landsberg said.

About a third of RBI's dining rooms in the U.S. and Canada have reopened, Mr. Dunnigan said, adding that the company plans to do so for all of them. RBI books higher average revenue per order in its drive-through and delivery business compared with dine-in.

Chipotle Mexican Grill Inc. earlier this month said it is opening more stores with drive-through lanes for digital orders. More than 60% of new stores will include these lanes, which are strictly for picking up orders placed in advance online.

Even restaurants that mainly offered dine-in before the pandemic are adjusting their business.

Waffle House Inc., a closely held restaurant chain based in Norcross, Ga., is expecting more takeout customers as the pandemic continues, said Chairman Joe Rogers. "We will have a bit more to-go business, and less competitors," Mr. Rogers said, pointing to the financial struggles of some of his rivals.

Write to Nina Trentmann at Nina.Trentmann@wsj.com and Mark Maurer at mark.maurer@wsj.com

 

(END) Dow Jones Newswires

July 29, 2020 10:33 ET (14:33 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.
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