Consumers Cut Back On Casual Dining

Posted In: Consumers

These days, restaurant owners are wondering where some of their customers have gone. In an ominous sign that U.S. consumers are starting to curtail spending, same-restaurant sales, or sales at restaurants open at least 16 months, were down 1.5% at casual-dining restaurants from January to April compared to the same period in 2006, according to restaurant industry consultant Malcolm Knapp in the June 20 issue of the Orlando Sentinel. High gas prices and a bad housing market are seen as the main culprits. In May, a National Retail Federation survey showed gas prices were taking a toll on consumers. According to the Consumer Intentions and Actions survey, 31.1% of adults said they have cut back on dining out due to the cost of gas. Bank of America restaurant analyst Andrew Barish told investors last month that with the summer driving season, high gas prices might make an even bigger impact as consumers are already struggling with a weak housing market. In an Associated Press article from May 30, Barish said, “For the past year, high fuel costs and slumping housing prices have contributed to weak overall restaurant sales trends (particularly casual dining)… Value offerings will be essential over the next few months as the middle-income consumer faces the potential for continued difficult macro-economic trends.” Cowen & Co. analyst Paul Westra told AP that the consumer environment and the price pressures on consumers may even continue to be a “net drag” on discretionary spending through 2007. Westra said, “As such, we believe that casual dining traffic will stay negative for the remainder of 2007.”

In addition to gas and housing, the rising cost of dining out is keeping patrons away from their local eateries. Today’s Wall Street Journal noted that, “Casual-dining restaurants are getting hit by rising inflation. Corn prices have surged due to demand for corn-based ethanol. Because corn is a big feedstock, it’s trickling into the cost of everything from chicken to cheese. Wholesale butter, cream and milk prices have jumped about 20% in the past three months, according to Raymond James.” As you can guess, menu prices are going up, and diners are staying away.

Anyone know if the 2 Whoppers for 3 bucks deal is still going on?

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