Restaurants shave prices, plump menus
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By Bruce Horovitz, USA TODAY
Casual restaurants are no longer taking the national dining slump casually.
In the face of a meltdown in same-store sales and falling customer counts, some of the biggest names in casual dining — from Outback Steakhouse to Applebee's to T.G.I. Friday's — are taking serious actions to try to salvage 2006. Some are even chopping prices.
Excluding the weeks after 9/11, this is the toughest period the industry has faced in nearly a decade, says Richard Snead, CEO of Carlson Restaurants Worldwide, which owns Friday's.
"This is unprecedented," concurs Paul Avery, COO of OSI Restaurant Partners (OSI), whose brands include Outback. Beginning in November, Outback plans to cut prices across its menu, he says.
The $68 billion casual-dining sector posted a 1.8% decline in same-store sales in June, the most recent month reported by Knapp-Track, which monitors the restaurant industry.
June guest counts were down 4.4%, CEO Malcolm Knapp says.
That may explain these moves:
• Outback. The chain has carved $1 off the price of its popular sirloin steaks in about 40% of its markets, Avery says.
By November, it will lower prices on ribs, side salads, appetizers and drinks, Avery says. "We've lowered prices from time to time, but never this magnitude."
•Applebee's (APPB). To lure price-sensitive diners, the chain has a three-course "Southwest Fiesta" promotion (appetizer, entree and dessert) for $9.99.
Applebee's today will announce it has hired Food Network chef Tyler Florence. He's creating four "fresh" entrees, which he calls quality cuisine at value prices.
"We're adding a whole different category of food to Applebee's," he says.
• T.G.I. Friday's. Known for appetizers, it has a new appetizer menu with limited-time discounts up to 50%, Snead says. Over the past six weeks, Friday's has introduced 23 items, the most ever for the chain, he says.
• Cheesecake Factory (CAKE). For the price-conscious, the chain has created smaller, cheaper lunch entrees. The Shepherd's Pie typically sold for $13.95 now has a lunch portion for $10.95.
It also added 16 food items, eight drinks and five desserts. That's the biggest menu change in a decade, says Howard Gordon, senior vice president.
• Bennigan's. Monte Cristos, usually $7.99, go for $5.99 on Mondays. On Wednesdays, half-pound burgers are $4.99 (usually $7.99). Next month, some markets will sell all burgers at $4.99, marketing chief Clay Dover says.
• Ruby Tuesday (RI). It recently added a Triple Prime Burger (tenderloin, sirloin and rib-eye) and will promote it with a $60 million TV budget, its biggest ever, says Rick Johnson, senior vice president.
usatoday.com
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I also believe the statement "This is unprecedented" speaks for itself. Did not Robert Toll say the same thing about housing?
Exactly what about that article implies local markets or Danville?
What set me off however was your statement "when housing prices went up, that was not inflationary because you said it wasn't."
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I have made many statements to the effect that the CPI was understated and that housing was understated in the CPI. If you search you can find them.
I get really bent out of shape when people distort my position and not only was that a gross distortion, it was followed up with clear taunts like "i agree with you: if prices are going up, it's deflationary, because that means less demand. and if prices are going down, that's deflationary, because prices are lower."
The above statement does not even make any sense as why would prices going up indicate less demand? I clearly never said anything like that either.
By the way even this statement made by you is more nonsense "when the CRB falls, it's deflationary because you say it is." What I have really said REPEATEDLY was that if a CRB rising is considered inflation then a falling CRB should be considered deflation.
I have not once stated we are in deflation, I have only stated that is where we are headed. But I do consider a drop in traffic at restaurants (many of them) to be a significant indicator of a shift in the propensity to spend. There is a consumer squeeze on and it is led by falling home prices.
It will be further enhanced when all these retail stores and restaurants stop expanding (something I expect to happen rather quickly). I suspect jobs will plunge after the lagging effect of all these stores being built starts to wayne and housing continues to wayne as well.
The Fed paused and everyone (excpet a few taunted deflationists) expected a huge plunge in the US$. Well lookie here. The dollar is headed up again today and a strong dollar is consistent with deflationary theory. For the record I am not expecting miracles but I do expect the dollar to hold up rather well even in the face of a slumping economy and recession, both of which are extremely likely.
People have been taught for over 40 years to borrow and spend because rising wages will bail them out. Well guess what, real wages have been negative for at least 4 years now. Increased spending was only possible because of two things
1) people were spending their houses
2) people were willing to go deeper and deeper in debt
Well after 40 years of this I think we have seen a blowoff top in credit expansion. I firmly believe that the unwinding of that credit expansion and all the mal-investemsnt in houses that people can not afford is obviously deflationary.
No we are not there YET. But we are headed there. You are free to disagree but you are not free to put words in my mouth that I never said or to distort my positions in a mocking way without getting a strong reaction.
I hope that clarifies things.
Mish
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