ATLANTA Olive Garden, Red Lobster and Texas Roadhouse are expected to benefit most from increased consumer spending spurred by the federal stimulus rebate checks hitting bank accounts, according to a Tuesday report from RBC Capital Markets Corp. restaurant analyst Larry Miller.
In a note to investors, Miller said that based on a monthly in-house survey, consumers still plan to spend only one-third of their rebate checks on discretionary items, while two-thirds will be earmarked for savings or to pay down debt. Still, about 82 percent of the survey’s respondents said they would spend some portion of their check on eating out at a restaurant.
When asked which restaurants they would visit with their rebate checks, the top three vote getters were Olive Garden, Red Lobster and Texas Roadhouse, the report revealed. When Miller adjusted the responses to account for brand awareness and chain size, BJ’s Restaurants and The Cheesecake Factory were also among the top vote getters.
“The larger and more value-oriented brands tended to score higher,” Miller said. “Generally, consumers showed a preference for moderately priced, casual-dining restaurants as opposed to fast food.”
Orlando, Fla.-based Darden Restaurants Inc. operates the 643-unit Olive Garden and the 678-unit Red Lobster brands. Louisville, Ky.-based Texas Roadhouse Inc. operates or franchises the 293-unit Texas Roadhouse brand.
RBC’s May consumer survey also revealed that overall consumer spending plans for the next 90 days improved for the first time since June 2007, with the number of respondents saying they plan to spend more up 3 percentage points from April, to 28 percent. The number of respondents claiming they plan to spend less in the next 90 says fell by 2 percentage points from April, to 40 percent.
The spending outlook for restaurants, however, remains at historically low levels, Miller said, with 35 percent of respondents saying they plan to spend less at restaurants in the next 90 days, and only 10 percent saying they plan to spend more eating out.
When consumers were asked in general where they would prefer to eat out in the next 90 days, consumers showed a preference for BJ’s Restaurants, Olive Garden, Red Lobster, and Texas Roadhouse. Brands with the least favorable responses included Chipotle Mexican Grill, California Pizza Kitchen and Starbucks.