Economy takes bite out of Indiana restaurants

BY ANDREA HOLECEK, Times of Northwest Indiana

holecek@nwitimes.com

Restaurant operators across the country saw a decline in sales and traffic during January, yet one sector of the business -- fast-food -- is faring better than others as customers search for less-expensive offerings.

The majority of National Restaurant Association members reporting said January was the third consecutive month of negative same-store sales and the fifth straight month of declining customer traffic.

"The economy is really affecting our industry," said John Livengood, president of the Indiana Restaurant Association. "If we're heading into a recession, the restaurants are further into it than other sectors. Last quarter was pretty bad for everyone. Some members told me they can't remember when it's been this slow."

Because Indiana is a manufacturing state, it and its restaurant businesses never fully recovered from the last recession and currently are being "hit pretty hard," making it an especially rough period for restaurants, Livengood said.

"There are just so many things hitting at one time," he said. "There's an increase in labor cost because of the increase in minimum wage. Food costs have gone up dramatically because of the shifting of corn production to ethanol.

"Energy prices are hurting ourselves and our customers," he said. "When gas hits $3 a gallon, you have to find that money some place. And it looks pretty certain there will be a 1 percent increase in general sales tax, So, you have all of that hitting at a time when the economy is poor."

The fine-dining, casual-dining, fast-casual and fast-food sectors of the industry all are struggling with the sagging economy and other factors that slash their bottom lines. Only fast-food restaurants are seeing higher traffic levels as they benefit from customers looking for less-expensive alternatives, Livengood said.

"The first thing people cut back on is going to restaurants, but in today's world, you can't avoid eating out, so people will look for way's to save money," he said.

Jim Evans, senior vice president of Barney Enterprises, said sales at the Crown Point-based company's four Wendy's locations are ahead of last year's numbers, despite the area's bad winter weather.

"People are cutting back," Evans said. "There's no question about it. There's a trend toward fast-food restaurants. We have the advantage that you can come into a fast-food restaurant and for a few dollars have a meal. When everyone's cutting back, there's a small advantage to being in the fast-food industry."