Economy eating into restaurant profits

Marketplace Staff Jun 5, 2008
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Economy eating into restaurant profits

Marketplace Staff Jun 5, 2008
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Scott Jagow: The airlines aren’t alone in their misery, though. The restaurant business is having a pretty tough time, too. There was a report that the company that owns Bennigans, Steak and Ale and some other chains was close to bankruptcy. The company, Metromedia, denies that, but says it is restructuring its debt. More now from Ashley Milne-Tyte.


Ashley Milne-Tyte: Metromedia is a private company and doesn’t release numbers. But Sarah Lockyer, financial editor at Nation’s Restaurant News, says Metromedia’s restaurants, like Bennigans, are suffering.

Sarah Lockyer: It’s still seeing an absolute decrease in guest traffic.

She says an increase in the minimum wage and high commodity costs are hurting all the mid-range chains. In a good economy it wouldn’t matter as much, she says. But when times are tight, casual dining means slumping on the couch with a tray rather than paying eight bucks for a main course at a restaurant like Bonanza.

Lockyer: I mean people are trading down from these, because you still have to pay your tip, you know and it’s a larger check, especially if you bring out the whole family than going to a quick service.

Now, many restaurants need to renegotiate their debt in order to stay in business. Lockyer says casual dining was already on a downward spiral. Consumers began to tire of too many similar chains, just as fast food joints started jazzing up their own menus.

I’m Ashley Milne-Tyte for Marketplace.

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