By Paul Carton

October 21, 2008

"Subdue your appetites, my dears, and you've conquered human nature."
--Charles Dickens

If Dickens were alive, he'd probably say it's been the "worst of times" lately for the economy at large. Nowhere is this more evident than in the restaurant industry.

Our latest ChangeWave Restaurant Spending surveys show consumers continuing to cut back on their restaurant expenditures. But in these extraordinarily tough times, which types of restaurant chains are being hardest hit? And are there any categories showing signs of improvement?

To find out, we surveyed consumers on their dining habits during the weeks of September 3-9 (n = 1,005) and September 16-25 (n = 4,067).

Next 90 Days - Restaurant Spending Cutbacks Continue

Spending on restaurants has fallen steeply (a net 6-pts) since our previous survey in August. More than four-in-ten respondents (44%) now tell us they'll be spending less on restaurants over the next 90 days. Only 6% say they'll be spending more.

Importantly, the year-over-year decline (Sep 2008 vs. Sep 2007) now stands at an unprecedented -29 points.

Consumers Going On A Diet

What reasons are they giving?

Nearly one-in-two (46%) who are dining out less frequently cite a general increase in the cost of living as the primary reason why. Higher energy costs (29%) and rising food costs (28%) also rank among the top reasons given.

Trouble for the Restaurant Industry:

Tables Are Emptiest At...

For the third consecutive survey, it's Upscale/Fine Dining restaurants that are taking the biggest hit in terms of the restaurant spending slowdown. Only 3% of respondents say they'll dine at these establishments More Often over the next 90 days, while 36% say Less Often (Net Difference Score = -33 pts).

High-end Casual restaurants are also being severely hit (-26).

If there's a glimmer of hope currently, it may lie in Quick Casual/Family restaurants - where total of 14% of respondents say they'll dine at them More Often, and just 12% say Less Often.

While it's difficult to pick winners right now, there are a handful of chains that do appear best positioned once consumers start to pick up spending again.

We asked our respondents which individual restaurant chains they'll be spending more and less money at over the next 90 days - and when we compared our results with the findings from our previous survey, three chains stood out from the pack:

Moreover, when we asked respondents to name their overall favorite restaurant, Chipotle and Carrabba's both showed gains since our previous survey.

On the down side, Red Lobster (-3 pts), is showing the biggest decline going forward of any chain in the High End/Casual space. Similarly, when we asked respondents which restaurants they're least likely to go back to, Red Lobster showed a change to the negative.

In the Moderate/Casual Category, Applebee's (-4 pts) has also taken a decided turn for the worse.

As the economic gloom deepens, more and more consumers are thinking twice before they dine out. And when they do, they're paying extremely close attention to their spending decisions.

Our current Restaurant Spending survey results show the downward trend lines continuing for the restaurant industry - with no immediate relief in site.

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Jim Woods co-wrote this article.