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Restaurants Recede as Americans Eat In

Published 08/29/08 Alexia Cameron - Print Article
E-mail - editor@economyincisis.org

As the receding economy continues to trickle into all sectors of American living, casual dining restaurants have fallen prey to the pummeling recession. Darden Restaurants warned that its quarterly profit will come in well below Wall Street estimates and predicts its shares will falter more than 12 percent for the full year, according to USA Today.

Sales at restaurants open for at least 16 months are expected to decrease 1.1 percent, led by a drop in Darden chains like LongHorn Steakhouse with a 4.9 percent drop and Red Lobster with a 3.7 percent drop.

Pitted against higher gas prices and insurmountable layoffs, restaurants have resorted to swapping quality products for cheaper ingredients, leaving many customers feeling embittered. Hershey’s and McCormick & Co. are scrimping on ingredients in order to increase profits in a weakened economy, and their lower end substitutes are being filtered into restaurants. Customers are then left with subpar food.

Further adding to the woes of the Restaurant business are pending laws requiring restaurant chains to provide the number of calories in each food item next to everything on their menus. New York became the first city to pass a law requiring caloric data on all menus in January. Los Angeles is expected to vote on its own law in the next two weeks, according to the Economist. While providing the number of calories next to menu items will help in mitigating America’s problems with obesity, some restaurants worry reprinting menus in light of a sluggish economy could be costly and could lead to customers abandoning their favorite meals.

As the American public continues to be rifled by the economy, restaurants are being forced to resort to cutbacks and as money tightens, more Americans are avoiding restaurants. Instead we are opting for home-cooked meals, using imported ingredients that further hinder our economy.

Source USA Today:

Darden Restaurants (DRI) warned that its quarterly profit will come in below Wall Street estimates and cut its forecast for the full year Tuesday, sending its shares down more than 12%.

...

Sales at restaurants open at least 16 months are expected to be down 1.1%, led by a 4.9% drop at LongHorn Steakhouse and a 3.7% drop at Red Lobster.

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