Fueling profits

eat here roads

The best thing about getting older is not being dead, a condition nine out of 10 doctors advise their patients to avoid. A ride-along benefit is recognizing more than a dash of the old in what’s supposedly brand new.

Among the big movies of the summer were new riffs on “The Terminator,” “Jurassic Park” and “Vacation,” with a take on “The Man From U.N.C.L.E.” due this month. The list of best-selling books includes new works from Dr. Seuss, Harper Lee and Ayn Rand. DVRs are recording remakes of “The Odd Couple” and a prequel to “Batman.”

And we’re heading into the mother of all flashbacks for the restaurant industry: Gas prices falling below $2 a gallon. Did someone turn back the calendar a few decades?

Fuel-industry analysts say a dramatic rollback in prices at the pump will be a near-certain result of Iran’s resumption of oil exports, tipping supply in a favorable direction for all.

For the U.S. restaurant industry, it would be a veritable godsend. Sales have been growing, albeit slowly. Researchers agree that fuel prices below $3 a gallon are a key reason. What if that average falls below $2 for an
extended time, and as soon as late 2015 or early next year?

Clearly, with less money going into consumers’ tanks, the public has more cash in wallets to indulge what the National Restaurant Association characterizes as serious pent-up demand to dine out.

The availability of more disposable income will no doubt add extra sauce to recent improvements in restaurants’ financial situation. Traffic has climbed back to pre-Great Recession levels, according to the research company NPD Group. It also sees acceleration in the growth of higher-margin on-premise sales, despite a push into delivery by many chains.

It’s no wonder Technomic has upgraded its sales projection for the industry to a 5.3 percent gain for 2015, from a forecast at the beginning of the year of about 4 percent.

The question is, where will the freed-up money go? Will there be a rising tide that raises restaurant sales across all segments? 

Conventional wisdom holds that quick-service places will be the major beneficiaries, given their segment’s price sensitivities and reliance on in-car sales.

Maybe stepped-up spending will end that sector’s menu schizophrenia. Right now, for every action taken, there is a roughly equal and opposite counteraction. Burger King touts 15-cent chicken nuggets; McDonald’s plugs one-third-pound burgers with grill marks. Panera Bread and Chick-fil-A experiment with healthful, wholesome ingredients like ancient grains and broccolini; Carl’s Jr. rolls a five-inch-high sandwich that’s made by stacking a split hot dog atop a burger patty that sits on a layer of potato chips, all inside a bun.

It may become QSRs’ boon, but right now family restaurants appear to be the big beneficiaries of lower fuel prices. Indeed, that once-nearly-dead segment is outpacing casual dining in sales growth, according to Knapp-Track gauges cited by financial analysts.

Regardless of how uneven the benefits may be, $2-a-gallon gas is a perk the industry hasn’t savored for an extended period since casual restaurants were known as fern bars. Old may be just what the industry needs to renew growth that outstrips the tepid levels of recent years.


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