Chain Restaurants Struggling To Compete

Myrtle Beach Sun News:

Fortunes at chain restaurants are tumbling, the fallout from a strategy of slashing menu prices in the hopes that a cheap meal will be enough to entice diners back to their booths.

Instead, diners are ringing up smaller checks, or simply staying home.

And the deep discounts, like the two meals for $20 being offered at places such as Chili’s and Applebee’s, come with a high cost for sales and profits. Some worry the chains are creating a culture of diners looking only for a cheap meal.

“These companies are competing any way they can to get customers in the door,” said Morningstar restaurant analyst R.J. Hottovy.

While the discounts became prevalent this year, the problems restaurants are facing stem from when the U.S. economy was flush, people were eating out more and developers could get easy credit for construction projects.

Since 2001, the number of so-called “casual dining” restaurants in the U.S. has grown 14percent, according to market research firm NPD Group. The number of chain restaurants in the category has grown by more than 26percent.

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