Lisa Johnson would be happy to eat IHOP's strawberry waffles every morning. Her husband, Steve, is such a fan of the omelets and taco salads served by Glendale-based IHOP Corp.'s restaurants that he paid homage on his website, Junk Food Blog.
The Johnsons of Riverside County, an area racked by high home-foreclosure rates, once dined out daily, usually at the nation's biggest pancake-house chain. But lately, the couple have been indulging only once a week.
"We're just cutting back, trying to save money for gifts for the family for the holidays," said Steve, 41, a website publisher with about 20 clients. "There are just a lot of people here worried about higher costs and debt, people we know who are trying to save enough just to make their house payments."
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.
