2012 Third Quarter Brings Mixed Reviews

As the third quarter of 2012 comes to a close, restaurateurs and analysts alike are looking at financial reports and coming up with mixed conclusions. This is perfectly normal, especially in such an uncertain economic period, but thankfully much of the news is encouraging, if a little cautious in its optimism. Although there are still some concerns about how this quarter has gone for the restaurant industry in general, there is widespread understanding about the reasons for some slow growth. As the end of the year approaches, however, expectations are somewhat skeptical for how the year will close out.

Third Quarter Difficulties

One of the main challenges that restaurants have faced this quarter is one that has been ongoing for the past few years. Restaurants are consistently forced to reevaluate their menu pricing in order to make up for rising overhead costs without driving away costumers. This is a delicate balance that is increasingly difficult to maintain as the cost of commodities, labor, and taxes all continue to rise and consumers continue to seek out the best value for the lowest price. Consumer spending is still at an all-time low, so restaurants are looking for ways to bring in new business and retain their regular customers with promotions and good value.

Also, some of the skepticism contributing to this quarter’s reviews comes from how the quarter compares to the previous quarter as well as how 2012 as a whole compares to 2011. Sales in the second quarter of 2012 were strong, making third quarter sales seem rather pale by comparison. For the same reason, the upswing in sales during 2011 makes sales for 2012 appear weak.

Consumer and Investor Hesitance

There are many factors influencing the hesitance of both consumers and investors when it comes to the restaurant industry. (Predictions and assessments of the restaurant industry as a whole are based on both restaurant performance and stock market trends). First of all, the fact that the presidential election is near, but as yet undecided, keeps economic conditions uncertain. The election creates uncertainty about commodities, consumer demand, and even healthcare, all of which make investors question the stability of the restaurant industry. Also, there are global economic concerns that have dominated the financial spotlight for much of 2012, which also contribute to more careful investing.

Positive Outcomes

Even with all these obstacles, there is still evidence that the restaurant industry has shown remarkable stability. For one thing, despite the rise in cost of many commodities essential to the restaurant industry, surveys of restaurant owners show that sales remain positive. Also, on average, restaurant stocks in the third quarter have still managed to consistently outperform other markets by .2%. The values of restaurant stocks are actually at an historical high, despite the comparatively low numbers shown by some analysts this quarter.

In other words, even though some of the data seems to paint a bleak outlook on the restaurant industry as a whole for this quarter, there are still some redeeming numbers that should be encouraging to restaurateurs and investors alike.

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