From the
NEW YORK TIMES By
WILLIAM NEUMAN: Consumers brave enough to pull out their wallets in
this economy have grown accustomed to fire sales on every kind of
merchandise, from fancy dresses to gas-guzzling cars. Now, add another
item to the list: the casual restaurant meal.
Ads, from top, feature discounts offered by Uno Chicago Grill,
Applebee’s and T.G.I. Friday’s in what has become a price war. The $5
sandwich and salad promotion at Friday’s led to a revolt by some
franchisees, who said they could not afford to feed the diners it
attracted.
The informal, sit-down restaurant chains that blanket the nation are fighting their most intense price war in years. Applebee’s is offering dinner for two for $20. Ruby Tuesday
is handing out coupons for two entrees for the price of one. Chili’s,
not to be outdone, is promoting some entrees for $7 or less.
“It’s
a tit-for-tat pricing war right now,” said Steve West, an analyst with
Stifel Nicolaus, a brokerage firm in St. Louis. “Each one’s trying to
outdo the other in a battle for consumers.”
The sit-down casual
segment of the restaurant industry has traditionally competed more on
advertising and location than price, but these days, the chains appear
to have little choice. Consumers hurt by the recession are eating out
less. So the restaurants are fighting one another for that shrinking
pool of diners, using deep discounts, heavily advertised on television,
to attract them.
The customers who do venture forth are
delighted. “This is really an incentive for us to go out,” said Norma
Rosado Blake, 38, an archivist, as she stood outside a T.G.I. Friday’s
restaurant in Clifton, N.J., with her husband the other night, for an
offer entitling her to $8 off.
But even as the chains compete
to come up with the best deal, some of the analysts who follow them are
worried. They fear that, as was the case with merchandise retailers
that sold luxury goods for 80 percent off, the restaurants are hurting
their long-term prospects by training customers to eat out only when
they are offered a bargain.
“The problem with that is once you
start dealing, you’ve got to deal forever,” said Harry Balzer, the
chief food industry analyst for the NPD Group, a consumer marketing
research company.
The heavy discounting is leading to tensions
between the people who, as independent franchisees, operate many of the
restaurants, and the corporate officers who control the brands, menus,
advertising and strategy. The franchisees agree that discounts can get
customers in the door, but wince at what they can do to profit margins. NEW YORK TIMES FULL STORY