Brinker International (NYSE: EAT, Stock Forum) and Cheesecake Factory (NASDAQ: CAKE, Stock Forum) shares show little signs of improvement.
Yes, it's that time of the month, as this scribe travels the state of Texas with the junior scribe in the pursuit of junior tennis perfection and casual dining experiences.
In this space we have reviewed the likes of Texas Roadhouse (NASDAQ: TXRH, Stock Forum) and Cracker Barrel (NASDAQ: CBRL, Stock Forum) in the past.
This time, we'd like to note that we found a new place, the Atlanta Bread Cafe' (www.atlantabread.com), which as far as we can tell is not publicly traded.
Yet, the concept is interesting, as it's partly Starbucks, partly Panera, and partly La Madeleine, another privately-held restaurant chain with multiple locations in Texas. The food was good, and the prices were not too bad, especially in comparison with the big guys like Brinker and Cheescake Factory these days where moderate meals for three can run into the $60-$100 range if you add other courses.
What makes Atlanta interesting is that it had a nice steady business in Wichita Falls, Texas, where we visited the location on Midwestern Parkway several times over the weekend. This was particularly noticeable in comparison to a Chili's we went to on Sunday night in Dallas, where there were lots of empty booths, and no lines.
More interesting is that a local mom and pop home made Mexican food restaurant in Wichita Falls was packed to the rafters when we visited on Friday night. It may have been a location thing, since the Valero station next to it was selling regular at $1.79 per gallon. Yet, this is a recurring theme, with local establishments being able to outperform the big chains.
What's our point with all of this? Casual dining is a canary in a coal mine for the economy. And traditionally, lower gasoline prices have helped the casual dining sector.
Yet, what we saw this weekend as we trekked across Texas was diverse. The highways had lots of traffic. But the casual diner was extremely selective. And with gasoline well below $2 in many places along the way, you’d think that people would be dining out a bit more, if nothing else just to get out of the house and escape the bad news.
The Atlanta Bread outlet was steady, but not full by any means. The Brinker outlet, Chili's was also sparsely populated. Meanwhile, the locally-owned establishment was packed.
To us, this suggests that the consumer is increasingly selective in how it spends its money. If you go to Chili's and order a drink, an appetizer, and three meals, it now runs close to $60.
At Cheesecake Factory, the same fare would run over $100. Yet, at Mom and Pop Mexican restaurants, the same would probably run around $40. And at those prices, the big guys can’t compete with the high volume local little guys with a more loyal clientele.
It looks as if the big chains are going to have to do something different in how they run their business, as they are apparently losing it to the local competition and the smaller niche players that operate within less competitive markets.