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Why Dine-In Restaurants Are Plunging After New Texas COVID-19 Mandate

By Rhian Hunt – Jun 26, 2020 at 2:33PM

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Companies with strong drive-through or delivery arrangements are falling much less.

The week's trading is ending on a sour note for restaurants with a business model heavily reliant on dine-in, such as The Cheesecake Factory (CAKE -2.33%) or Red Robin Gourmet Burgers, Inc. (RRGB 0.15%) after the state of Texas announced an executive order today limiting restaurant, bar, and other business operations. The Lone Star State's move comes as a rapid uptick in COVID-19 cases after reopening causes fears of the pandemic's return to full strength.

The executive order from Governor Greg Abbott closes bars and all other businesses earning more than 51% of their gross take from alcohol sales, except for take-out and delivery sales. The order also mandates that restaurants must begin operating at a maximum of 50% dine-in capacity starting next Monday, June 29. It shutters tubing and rafting businesses outright and bans outdoor gatherings of 100 or more without special permission.

A masked restaurant server.

Image source: Getty Images.

Governor Abbott stated that the "actions in this executive order are essential to our mission to swiftly contain this virus and enhance public health. We want this to be as limited in duration as possible."

Signs of the coronavirus's return and official limits on restaurant occupancy appeared to affect restaurant stocks with significant dine-in sales. Cheesecake Factory shares have dropped more than 9%, while Red Robin is down more than 8%, Dine Brands Global (DIN -1.27%) over 8%, Brinker International (EAT -2.54%) over 6%, and Shake Shack (SHAK -3.52%) over 5%, among others.

At the same time, restaurant companies with a strong delivery component appear less affected, with Domino's (DPZ -1.94%) and Chipotle Mexican Grill (CMG -2.63%) with its numerous drive-through "Chipotlanes" each down only around 1%, and McDonald's (MCD -1.56%), another chain with a strong drive-through model, down just 1.7%.

Rhian Hunt has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Chipotle Mexican Grill. The Motley Fool recommends Domino's Pizza. The Motley Fool has a disclosure policy.

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Stocks Mentioned

The Cheesecake Factory Incorporated Stock Quote
The Cheesecake Factory Incorporated
CAKE
$29.28 (-2.33%) $0.70
McDonald's Corporation Stock Quote
McDonald's Corporation
MCD
$230.74 (-1.56%) $-3.66
DineEquity, Inc. Stock Quote
DineEquity, Inc.
DIN
$63.56 (-1.27%) $0.82
Chipotle Mexican Grill, Inc. Stock Quote
Chipotle Mexican Grill, Inc.
CMG
$1,502.76 (-2.63%) $-40.59
Brinker International, Inc. Stock Quote
Brinker International, Inc.
EAT
$24.98 (-2.54%) $0.65
Domino's Pizza, Inc. Stock Quote
Domino's Pizza, Inc.
DPZ
$310.20 (-1.94%) $-6.15
Red Robin Gourmet Burgers, Inc. Stock Quote
Red Robin Gourmet Burgers, Inc.
RRGB
$6.73 (0.15%) $0.01
Shake Shack Inc. Stock Quote
Shake Shack Inc.
SHAK
$44.98 (-3.52%) $-1.64

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