Many chain restaurants struggling to compete

That growth may have been simply too ambitious, and now there's quiet speculation that some chains may not survive the economic downturn. "We don't think this trend is sustainable," Hottovy said of the efforts among the faltering restaurant chains to lure in new customers.

http://www.suburbanchicagonews.com
October 25, 2009

Many chain restaurants struggling to compete
Ashley M. Heher, The Associated Press

Fortunes at chain restaurants are tumbling, the fallout from a strategy of slashing menu prices in the hopes that a cheap meal will be enough to entice diners back to their booths.

Instead, diners are ringing up smaller checks, or simply staying home.

And the deep discounts, like the two meals for $20 being offered at places such as Chili's and Applebee's, come with a high cost for sales and profits. Some worry the chains are creating a culture of diners looking only for a cheap meal.

"These companies are competing any way they can to get customers in the door," said Morningstar restaurant analyst R.J. Hottovy.

While the discounts became prevalent earlier this year, the problems restaurants are facing stem from when the U.S. economy was flush, people were eating out more and developers could get easy credit for construction projects.

Since 2001, the number of so-called "casual dining" restaurants in the U.S. has grown 14 percent, according to market research firm NPD Group. The number of chain restaurants in the category has grown by more than 26 percent.

That growth may have been simply too ambitious, and now there's quiet speculation that some chains may not survive the economic downturn.

"We don't think this trend is sustainable," Hottovy said of the efforts among the faltering restaurant chains to lure in new customers.

Brinker International, which reported first-quarter results Tuesday and owns 1,700 restaurants, most of them Chili's Grill & Bars, said customer traffic fell for the 21st consecutive quarter.

Meanwhile, revenue skidded 21 percent and profits sank 34 percent, despite efforts around its three-course meal deals for two, priced at $20. That sent shares down more than 11 percent Tuesday.

On Wednesday, Asian-themed eatery P.F. Chang's China Bistro Inc. delivered disappointing results, too. Even as net income rebounded from last year when it was weighed down by a one-time charge, customer traffic was off as much as 7 percent.

Late Tuesday, Japanese steakhouse owner Benihana Inc. said sales in locations open at least a year fell almost 10 percent during its most recent quarter.

Copyright 2009 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

http://www.suburbanchicagonews.com/couriernews/business/1841897,102509restaurants.article


Brought to you by WikidFranchise.org

Risks: Discount programs destroy retail margins but boost wholesale profits, Expands too quickly, , United States, 20091025 Many chain

Unless otherwise stated, the content of this page is licensed under Creative Commons Attribution-ShareAlike 3.0 License