Pain at the Pump Fuels Slump in Casual Dining

The effects of high gas prices are being felt in unusual places. Casual dining restaurants are reporting a decline in diners.

It’s because those diners are feeling the pain at the pump.

The casual dining slump that began back in April when gasoline prices first spiked upward is accelerating, fueled by uncertainty at the pump.

Anxiety about the war on terror, even rising mortgage interest rates, an a-la-carte menu that has more friends and families postponing plans to go out and eat.

Restaurant analyst mike smith says, "I think people tend to want to go out to eat, and will do that, but they need to know with some certainty that they're not spending themselves into the poorhouse."

Major restaurant groups like Outback Steakhouse, Applebee’s, and the Cheesecake Factory are fighting back with beefed up advertising, lower prices, in some cases smaller portions.

Those lost diners quickly show up as lost revenue on the bottom line.

According to Knapp Track, which monitors the restaurant industry, the 68 billion dollar a year casual dining sector posted a 1.8% decline in June.

Same store sales and guest counts, the number of people actually showing up was down 4.4%, most of the people staying home, low income families feeling the squeeze from high energy prices.

Malcolm Knapp says, "When you look at the bottom 20 percent of the income distribution, there's spending a little over 23 percent of their disposable income on all forms of energy, whereas the people in the top 20 percent of the income distribution are spending only 4.9 percent."

Overall, the sector is still growing.

Lots of new restaurants are going up nationwide, and yes, more people than ever going out to eat.

However, it's the slowdown in the overall growth rate, just like using that has analysts and industry experts concerned.


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