Sunday, November 25, 2007

Too Expensive to Eat Out?

Another Symptom

The slowing economy is giving restaurants heartburn, with experts calling this the worst period for eateries in years.That's because consumers are having their pockets picked by high energy prices, declining home values, tightening credit from the sub-prime real estate bust and the falling value of the dollar, which makes imported goods more expensive.

"It's a perfect storm, with the industry being bit by several negatives at the same time. And we don't think gas prices are at the top of that list. Mortgage payments for people with adjustable rates are already higher. Couple that with higher interest rates for people who are maxed out on their credit cards and you have an immediate squeeze on income on a monthly basis," said Ron Paul, president of Chicago-based Technomic Inc., a food industry consulting firm.

Examples abound.

P.F. Chang's China Bistro Inc. recently reported a nearly 20% decline in third-quarter profit from a year earlier. Panera Bread cafes predicted that fourth-quarter earnings were unlikely to surpass those of 2006. Brinker International Inc., owner of Chili's Grill & Bar and other chains, reported a 21% drop in fiscal first-quarter profit.

IHOP fell short of Wall Street expectations last month when it reported an $11.6-million third-quarter loss, contrasted with an $11.3-million profit a year earlier. Its conference call with analysts and investors included repeated references to the "difficult economic climate" faced by the restaurant industry.

Sales at eating and drinking establishments grew 5.6% during the first 10 months of the year, the Commerce Department said, the slowest pace since 2002.

"We are all facing the same pressures," IHOP Chief Executive Julia Stewart said in an interview. "There are things you can't necessarily control: the rising cost of gas, commodities, concerns about the war, concerns about layoffs. What usually winds up happening is that people look more selectively at their trips out of the house, and we are fighting for the same dollar."

National restaurant chains aren't the only ones feeling the pinch. Some smaller, local chains complain that business is even slower than it was in 2001, when the 9/11 terrorist attacks brought dining out to a crawl for about two months.

"We are doing about 30% less business than we ordinarily do. Since June, it has really fallen off," said Fernando Lopez, owner of Guelaguetza, a chain of four Oaxacan-style Mexican restaurants in the Los Angeles area that thrive on a strong following of customers from as far away as San Francisco and Las Vegas. On a recent afternoon, Lopez looked over too many empty tables at his 300-seat restaurant on Olympic Boulevard.


Higher-end restaurants remain relatively unaffected by the more difficult economic climate, experts said. As Randall Hiatt, a Costa Mesa restaurant consultant, put it: "The cream of the $5-million homeowners whose homes are now worth $4 million -- they really aren't feeling this pinch."

I travel a lot and eat in restaurants all the time but not by choice. When I am at home I very rarely go out to eat mostly because I like to cook and really don't like paying big bucks for food that I can make better and more cheaply at home. I am also trying to eat locally and organically and you just can't do that successfully by eating out. Madam and I know several people that eat out far more often than they eat at home and we know one couple that eats every meal out.

From what I gather of the readers here I don't think there are many that eat out a lot but are any of you making conscious decisions on dining out or at home for economic reasons? Are any of you cutting back on restaurants or downsizing to fast food as the article implies? For me it is not primarily an economic decision but I find it is beginning to take a more prominent place in the decision than it used to. I surely see that I am spending more on food than I used to. Part of it is trying to buy locally and organic but that is not the only contributor.

It could be that others are like me and trying to eat healthier or they are spending too much time watching the Food Network (Ahem!) and are aspiring gourmet chefs. I sure enjoy cooking and find a relaxing and enjoyable hobby. It will be interesting to watch how restaurants do over the next couple of years. Are we seeing a trend toward a return to home cooking or is it just getting too expensive to eat out on a regular nasis?

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