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Rising Gasoline Costs Raise Consumer Stress Levels



A recent overnight survey conducted by the foodservice industry researcher shows that the impact of rising gasoline prices seems to be taking its toll on consumers' restaurant spending. Roughly 18% of consumers said they have reduced their spending in quick-service restaurants because of higher fuel costs while 19% said they are cutting back spending at full-service restaurants, according to the results of the study.

"It appears that the threshold has been reached where consumers are feeling the pinch of higher gas prices and are beginning to reduce their restaurant spending," observed Ron Paul, president. "We are also seeing softness in restaurant same-store sales, which we track monthly, further validating a reduction in consumer spending."

Explaining the results of the survey that were released this week, Bob Goldin, executive vice president of the researcher, pointed out that for a "shockingly large" segment of the American population, that is already economically stressed, the rising prices have directly impacted disposable income.

Despite Americans' desire to eat out, the most affected population group is being forced to choose among activities, about which they previously did not think. For them to pay $20 a week more for gasoline, or $1,000 a year, adds a considerable burden to their family budgets.

"For a large part of the population, it is directly impacting disposable income. So they are really forced to adjust," Goldin said in an interview with ID Access. "While this is affecting certain consumer groups more immediately than others, the news and coverage of the story does tend to affect all of us."

Likening the effects to a thermometer, Goldin stopped short of projecting that when gasoline prices go down, consumers will start spending more. He anticipates that this adverse economic condition will have "a longer-lasting effect on dampening demand." With consumers trading down, Technomic sees that QSR and other lower-cost operators will benefit. In order to stay ahead of the downturn, Goldin advises operators to offer value options, such a lower-cost menu choices, to consumers.

On the other hand, foodservice distributors, which are enduring their own significant cost pressures, are in "a more difficult situation right now," he said.

"At the same time that we're suggesting to operators to look at stable options and lower-cost protein items, to go from steak to chicken and give consumers more low-cost choices, distributors, unfortunately, don't have a lot of options. For them it's cost management," Goldin said.

Goldin categorically ruled out advising operators to increase their menu prices now to compensate for broad price hikes in foodservice goods and services, as some distributors have been suggesting to their customers. He said patrons, "who are already stretched thin," would not be able to tolerate higher menu prices.

"This is when you tighten the belt buckle, batten down the hatches, and try to weather a pretty difficult storm," he noted.

Continuing with the storm illusion, Goldin characterized it as a "perfect storm" that is gaining strength from the combined effects of rising fuel, energy, insurance, healthcare and regulatory costs.

"This is a very challenging cost environment. You're going to have to run hard to stay in place. I don't mean to say the sky is falling but we're in a rough time," he said.

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