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Casual Dining Appetites Revive as Confidence Returns

US consumers are dining out at full-service restaurants with a consistency not seen since the housing market began its long decline four years ago, in a sign that the nation’s middle classes are becoming more confident about the future.

Fork and knife, place setting on money, cutlery on napkin with plate, expensive food
CNBC.com
Fork and knife, place setting on money, cutlery on napkin with plate, expensive food

Sales at middle-market “casual dining” chains that have been open for at least one year in the US were up over last year’s comparable numbers for 16 of the 18 weeks from late June through October, according to a survey, known as the Knapp Track Report.

That makes four consecutive months in which sales outpaced those of last year.

Chains such as Applebee’s and Olive Garden offer casual dining, which unlike fast food restaurants offer waiter service.

The resurgence of casual dining suggests that a greater percentage of US households are becoming more confident about their economic future, coming after last week saw a strong rebound in car sales at General Motors, sales growth at retailer JC Penney and positive news on the employment front.

According to Malcolm Knapp, who has been compiling data on the $35 billion casual dining industry for decades, the strong October numbers suggest a sea-change among consumers with household incomes above the US median of $49,000.

“It means that people are more willing to spend on what they want as a lifestyle issue”, he said. Unlike fast food sales, which are often driven by utility and time constraints, casual dining is largely a discretionary spend.

“Consumer spending is picking up,” says Milton Ezrati, senior economist at Lord Abbett.

“It’s far from robust, but it’s picking up. It’s a sign that confidence is growing and reaching the middle sector, which was much more worried about jobs.”

Mr Ezrati said there was a growing sense that the two-year wave of job cuts had crested.

“The blood-letting has stopped, and that has helped people who have jobs feel more comfortable”, he said.

The streak of improving restaurant sales began in July, when same-store sales grew 0.9 percent over figures from July 2009, which marked a nadir for the sector.

Starting in August 2009, casual dining chains dramatically reduced their prices, which kept customers flowing in, but contributed to lower sales.

In spite of those promotions, comparable sales this August were up 0.2 percent over the previous year, while September’s figures were 1.2 percent higher.

For the quarter ended September 30, comparable store sales at DineEquity’s Applebee’s chain, a bellwether for the industry, were up 3.3 percent over comparable results for the same period last year.

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