Dive Brief:

• Kura Sushi USA, which went public last year, announced a total sales decrease of $14.1 million year over year for Q3, as well as an operating loss of $8 million and net loss of $9.2 million for the period, according to a company release. The Orange County Register reported that analysts predicted the chain would see a net loss of $6.5 million. 
• The revolving sushi chain temporarily closed its 25 restaurants across five states during stay-at-home orders. While Kura Sushi began to reopen certain restaurants beginning May 22, its restaurants were largely closed during the quarter.
• Despite these results, President and CEO Hajime Uba said he is confident in the company’s ability to navigate the pandemic and remains "excited about the long-term growth opportunities of our business." The company currently has five restaurants under construction. 

Dive Insight:

This latest round of earnings reports will no doubt provide plenty of insight into just how much damage the COVID-19 pandemic has done to the restaurant industry. While some concepts — particularly those with heavy drive-thru, carryout and delivery business — even heavily automated brands like Kura Sushi could suffer from depleted sales. 

This could be surprising considering the revolving sushi bar is built on technology innovation, including robot chefs and automated food ordering and billing. The concept owns 31 patents for technology, which is one reason why its IPO was so promising. 

But while that technology may save the chain labor and other operating expenses, Kura Sushi also relies on that technology as part of its overall unique “revolving” dining experience. It repeatedly touts that differentiator on its website, noting that “everyone at the table can create their own distinctive dining experience.” Brands built on dine-in experiences or “eatertainment” have been devastated by the pandemic. 

Such a strong dine-in experience message may have affected Kura Sushi’s ability to pivot easily to takeout and delivery, even though sushi itself is a popular option for both. A quick off-premise shift early on in this crisis has been critical in keeping casual, sit-down chains afloat, and is the reason some of those dine-in chains, like Darden, are poised for a recovery. Kura Sushi didn’t disclose numbers from its off-premise channels in its COVID-19 update, however. 

During its Q3 earnings call just this week, Uba said “We are now actively working on building out our off-premises business and the infrastructure for all of our restaurants,” reiterating that the core of the business remains that indoor dining experience. This may make recovery harder as states like California, where Kura Sushi’s USA headquarters are located, begin re-closing restaurants as COVID-19 cases rise.