Gas Costs Eat Into Restaurant Sales

Unfortunately for the $175-billion U.S. sit-down restaurant business, the Pierces aren't the only ones staying away from their favorite eateries. In the last few months, restaurants such as Chili's, Cheesecake Factory and Applebee's -- what analysts call the "casual dining" category that offers table service and alcoholic beverages -- have recorded small but discouraging sales declines.

They are responding by offering discount burger specials and new menus featuring lower-priced items with smaller portions and by pushing the gift card business.

The culprit, restaurant chains say, is soaring gas prices. But rising interest rates and increases in the minimum payments that consumers must make on credit card debt have added to the problem.

"The Chili's and Applebee's of the world -- some of their customers don't have all that much money," said Michael Smith, an analyst with Oppenheimer & Co. "They get startled when they fill up their SUVs, so they stop dining out or they trade down to fast food."

Sandra Contreras of Glendora said she was "picking places closer to home" when she ate out to save gas. Contreras also is choosing less expensive places such as Pizza Hut over a nicer sit-down meal at Chili's.

Sales at Chili's restaurants open at least a year, an important financial measurement known as same-store sales, fell by more than 0.5% in both May and June. The company hasn't yet said how it fared in June, but analysts expect another decline.

Same-store sales at Macaroni Grill, which like Chili's is owned by Dallas-based Brinker International Inc., are falling at an almost 5% clip.

Applebee's International Inc., P.F. Chang's China Bistro Inc. and even the typically successful Calabasas Hills-based Cheesecake Factory Inc. all have fallen victim to the same trend.

"The restaurants first started to see this in May. It was worse in June and the few numbers we have seen for July show that it is accelerating," Smith said.

Almost 30% of respondents in a June survey of 680 Californians by BIGresearch said they had cut back on eating out in response to high gasoline prices. That's up from 21% in the same survey a year earlier.