Restaurateurs living in fear of rising gas prices

Mounting gas prices still haven’t made much of a dent in eateries’ bottom lines – but they will, and soon, according to the National Restaurant Assn.
At this rate, the cost of fuel will quickly eat up the extra cash that consumers use for discretionary purchases, including meals out on the town, according to the trade group’s chief economist Bruce Grindy.

In a blog post, he said that an NRA survey of 600 restaurant operators this month showed nearly three of four respondents feeling the pinch of high gas prices. Managers said that sales were down an average of 5%, while suppliers were charging more to cover fuel expenses.

More than three-quarters of limited service operators, which include fast-food and fast-casual chains such as McDonald’s and Chipotle, said gas prices were negatively impacting business; 71% of full-service restaurants said the same.

Since low-income households tend to be disproportionately affected by high fuel costs, Grindy wrote that the restaurants they patronize will probably endure the deepest gas-related slump.

Analysts such as John Staszak of Argus Research, however, said that belt-tightening consumers “tend to trade down to fast-food chains like McDonald’s.” And better-than-normal weather may boost dining spending enough to cover any gas-related slouch.

“It’s business as usual for us,” said Ashlee Yingling, a spokeswoman for the golden arches, in mid-March.

But with their high-volume demands, chains are more affected than independent operators – 82% of multi-unit establishments are hurting, compared with 71% of lone-wolf restaurants. Rural eateries are suffering; urban ones, not so much.

Overall, however, the shift isn’t enough to cause any significant financial pain, Grindy wrote. Restaurant sales, including revenue from new establishments, hit a record monthly high of $43.4 billion last month.

And after 2008’s run-up in fuel costs, consumers aren’t quite as pessimistic this time around – yet, said Nick Setyan, an analyst at Wedbush Securities Inc.

“People have seen gas prices at this level before,” he said. “The novelty impact now may not be as heavy.”

But if driving keeps getting more expensive, that may change.

“The psychological impact hits once people feel like it’s not changing, that the prices are here to stay,” Setyan said. “And if this rise is sustained, their behavior may change in the not-too-distant future.”