#Moody’s upgrades restaurant industry, cites ‘stable outlook’

The battered restaurant industry appears to be waking up from its coronavirus-induced coma, an influential debt ratings agency has found.

Moody’s Investor Services on Monday boosted its rating for the struggling industry to “stable” from “negative,” citing customers’ increasing willingness to dine out.

The rating agency said its expects industry-wide operating profit to rise by 15 percent in 2021 after falling by more than 30 percent in 2020, led by fast-food drive-thrus and takeout.

“The stable outlook for the US restaurant industry reflects slowly improving business conditions over the next 12 to 18 months, as restrictions implemented to curb the spread of the coronavirus are slowly eased and customers gradually return to dining out,” Moody’s vice president, Bill Fahy said in a statement.

Quick service restaurants, especially those with drive-thrus, lead the pack, Moody’s said. Casual eateries have been helped by their pivot to curbside pick-up and delivery, the rating agency said.

Moody’s also warns that restaurants still face plenty of risks, including social distancing rules that limit their indoor dining capacity and consumers’ preference for eating outdoors, a prospect that will become more difficult in the winter months.

Restaurants also face increasing competition from supermarkets, convenience stores and coffee chains, including Starbucks and Dunkin’ Brands, who are serving up more prepared food than ever before, according to Moody’s.

By the end of the year, “for the first time in a long while, the number of US restaurants is expected to decline,” Fahy said. “And more closures are likely, depending on how long this operating environment continues.”