U.S. diners plan to cut restaurant meals spending

* U.S. diners plan to remain frugal over next year-study

* Higher food costs could dent restaurant profits

By Lisa Baertlein

LOS ANGELES, May 4 (BestGrowthStock) – U.S. consumers are eating
out more frequently, but plan to spend less on each meal,
according to a study released on Tuesday by advisory firm
AlixPartners.

Consumers surveyed in late March said they planned to spend
about $11.60 per restaurant meal over the coming 12 months —
down 21 percent from 2008 and 4 percent lower than last year.

Restaurants, which have seen traffic stabilize after the
recession spawned steep declines, also are bracing for higher
food costs later this year.

“Despite some stabilization of late, the restaurant
industry is by no means out of the woods,” said Andy
Eversbusch, a managing director at AlixPartners and head of the
firm’s restaurant and food service practice.

“Sales will continue to be pressured by growing price
sensitivity among virtually all consumers, regardless of the
types of restaurants they visit,” Eversbusch said.

Lower food costs made it easier for all restaurants to
offer discounts in 2009.

The Subway chain grabbed headlines with its $5, foot-long
sandwich deal that established the second-most important
restaurant price point since McDonald’s Corp (MCD.N: ) introduced
its Dollar Menu in 2002. [ID:nN17480279]

The expected decline in restaurant spending was due in part
to the “Subway Effect,” said Eversbusch.

“This will be another year of deals. It has to be,” Adam
Werner, a director at AlixPartners, told Reuters.

But not every operator feels that way.

Chili’s Grill & Bar parent Brinker International Inc
(EAT.N: ) said in April it planned to lessen its dependence on
discounts.

Chili’s featured a “3 for $20” deal offering two entrees
and both an appetizer and a dessert to split between two
diners. The promotion initially cut into margins but eventually
drew enough diners to have a positive effect.

Brinker’s sentiment is becoming more prevalent as food
costs creep up and threaten to squeeze operators that depend on
discounts.

AlixPartners director Adam Fless said companies can
insulate themselves by doing things like adding high-margin
products to menus, improving service and investing in growth
markets like China, India and Brazil.

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(Reporting by Lisa Baertlein, editing by Leslie Gevirtz)

U.S. diners plan to cut restaurant meals spending